At TowerXchange Meetup Europe 2024, CXOs from four towercos present across CEE discussed market dynamics, evolution price points, and regional specifics which impact how you build and manage infrastructure that is sustainable in the long run.
As the concept of tower independence is still new to the region, the comparison to the more mature western part of the continent was inevitable.
East versus West
The East European tower deals have been relatively average in portfolio size. An Actis-led consortium bought 1,800 sites from Telekom Srbija in 2024, and in 2023 TAWAL acquired 4,800 assets from United Group. In Western Europe we’ve seen very large transactions and mega deals in Germany, France and Spain. This is partially reflected in the sizes of the countries, and the timing of the deals. Putting aside Poland and Romania the markets in CEE are fairly small.
According to Gergo Budai, Managing Director Cluster Markets at Vantage Towers, the countries are small in terms of geography but very diverse in terms of terrain. One comparable example is Hungary and the Czech Republic, which have roughly similar population and geographic sizes but the tower numbers in the Czech Republic are higher by the thousands than those of Hungary due to the geography of the country. There are also variations in regulatory standards and policy frameworks, as some countries are in the European Union (EU), some are in the Eurozone while others are not members of any of the two.
Santiago Argelich, CEO at Cellnex Poland added that Western Europe still has MNOs on high ARPU while in CEE, the markets run on much lower ARPU. The latter creates challenges for infrastructure providers who need to build infrastructure that is sustainable longer-term in markets with lower ARPU.
Ivo Ivanovski, CEO of EuroTeleSites thinks that the challenges between Central and Eastern European countries are similar but there is no regulatory standardisation across the region. This makes it much more challenging for towercos to roll out quickly to keep up with scaling 5G adoption. He shared that, towercos should be as less regulated as possible until the industry on the continent becomes more mature.
Regulation
“For 5G rollout and for the big picture, we need to be all operating in a more predictable environment, with more harmonised regulation” continued Ivanovski. There are countries where regulation is very diverse and permitting decisions happen at all levels of government from the national level right down to local municipalities, making it very complex for infrastructure providers.
Adding to that, Argelich said that the region has significant growth potential which requires networks to be deployed quickly to keep up with scaling demand. He gave Poland as an example of a market where demand for new tower infrastructure is high, but local regulation can lead to permitting taking up to 24 months, hindering rollout speed significantly.
Emmanuel Leonard, Chief International Officer at TAWAL gave examples of their three European markets being on the two opposite sides of the spectrum. Bulgaria, their biggest market, is heavily regulated in terms of licensing and pricing, whereas Slovenia has no licensing framework for towercos. He added that in addition to markets being very different from one another and regulation varying based on the typology of land, the fact that the CEE markets are not at critical scale adds another complexity that towercos have to manage, which in turn makes operating at a cluster level challenging.
Market scale and development
As there are already CEE markets which are smaller but have three towercos present, what would be the next step to achieve economies of scale to lower the cost of infrastructure?
Lacking maturity is not always a disadvantage, according to Gergo Budai, as it means certain stages of towerco evolution can be skipped . He gave an example with CEE countries not investing so much in 2G as there was already advanced 3G and later some of the 3G investments were skipped because they went to 4G. The latter, he says, translates into better quality of some of the networks if you compare them to Germany or the UK. In addition, the complexity of permitting in some countries like Hungary has been significantly reduced over time taking up to 90 days for a tower or a rooftop site now which is not the case in more advanced western markets like Ireland, for example.
Passive infrastructure management models exist across Europe but only in CEE are we seeing innovative business models such as managing RAN (CETIN in the Czech Republic, Cellnex in Poland), providing RAN as-a-service (Cellnex in Poland), or IT services (CETIN in the Czech Republic). Argelich thinks this is due to MNO financial pressures from ARPU conditions who have decided to embrace a broader financing model and divest more than just passive assets if compared to their western counterparts. New business models can also help towercos scale up and grow in markets where passive infrastructure management is limited by market size.
Ivanovski thinks that towercos who have built-to-suit (BTS) commitments have very predictable business models for the period of the BTS with the core revenue coming from the MNOs. After that period finishes, we will see more development on the tower business models and that will be in three to five years’. The demand for operational efficiency is present in towerco agendas today regardless of the business models they follow, and he believes we will see efficiency being there in the future as well. In addition, he thinks in-market towerco consolidation will happen as part of market evolution.
According to Leonard, the increasing levels of urbanisation and greater emphasis on urban planning will also drive demand for a wider range of connectivity solutions from towercos in the short to medium term. Some CEE-present towercos are already looking at adjacencies but this is very market-specific. Argelich shared that in Poland demand for DAS and in-building coverage is huge and that the customer base is growing beyond their core MNO tenants. Cellnex Poland gets requests for providing coverage from real estate developers and property owners such as hospitals, skyscrapers, power stations and stadiums.
There is no single towero model for CEE. The not so good financial strength, high diversity of regulation and uncertainty lead to towercos exploring models to become more efficient in order to make sense in a growing market with tight economics. Cooperation between towercos within a market should be up to neutral infrastructure operators finding the right level of cooperation or bilateral agreements to leverage on each other's infrastructure whenever that makes sense for their customers.
