The MENA telecom tower industry has witnessed significant transformation over the past year, marked by major mergers, acquisitions, and strategic initiatives aimed at bolstering infrastructure and operational efficiencies. As the region continues to embrace digital transformation, the telecom tower sector has become a crucial element in facilitating advanced connectivity and smart solutions.
Major M&A's
Ooredoo and TASC Towers
In a landmark deal in 2023, Ooredoo merged its entire portfolio of 20,000 towers TASC Towers as part of a strategic merger with Zain Group, wherein Ooredoo secured a 49.3% equity stake in the newly formed entity. The merger marks a significant expansion for TASC Towers, which is now tasked with managing and integrating Ooredoo’s extensive tower portfolio.
TASC Towers is currently focused on a phased takeover of Ooredoo’s assets, which includes operational, asset, and workforce management on an unprecedented scale for the region. The company is also taking over energy management responsibilities from Mobile Network Operators (MNOs), overseeing grid connections and generator ownership. Looking ahead, TASC plans to grow organically in both existing and new markets, with a Build-to-Suit (BTS) commitment of 1,800 sites over the next five years. Additionally, TASC is eyeing long-term market consolidation opportunities.
TAWAL and LATIS Merger
Another key merger in the MENA telecom tower industry is the upcoming unification of TAWAL and LATIS, creating a combined entity with approximately 24,000 towers in the Kingdom.
Originally a carve-out of Saudi MNO stc Group and since acquired by sovereign wealth fund the Public Investment Fund (PIF), TAWAL has expanded regionally acquiring local towerco Pakistani AWAL Telecom and now internationally by acquiring United Group's tower assets in Central Eastern Europe. Now, the towercois currently preparing for their own tower sale to complete TAWAL’s consolidation of the Kingdom’s tower market. TAWAL is leading the deployment of digital and smart infrastructure, launching a modular 5G smart pole solution and shared in-building solutions (IBS) for MNOs. They also collaborate with megaproject developers to design, build, and operate smart city networks.
LATIS, formed after PIF acquired Zain KSA’s towers, is focusing on increasing tenancy ratios and upgrading sites for colocation. The company is also exploring additional services beyond traditional macro infrastructure, particularly energy solutions.
In a significant development, PIF and Saudi Telecommunications Company (STC Group) have agreed for PIF to acquire a 51% stake in TAWAL. PIF and stc Group will consolidate TAWAL and LATIS into a new entity, with PIF holding 54% and STC Group 43.1%, while LATIS minority shareholders will own the remaining shares.
Expected to complete in the second half of 2024, this consolidation will improve operational scale and cost efficiency, unifying STC Group and Zain under one infrastructure owner, facilitating higher tenancy ratios, and reducing network overlap.
Enfrashare and local tower companies
Engro Enfrashare has been actively collaborating with local tower companies to expand its footprint while addressing cost challenges. With the cost of capital for tower deployment rising by 35%, Enfrashare is constantly renegotiating prices with MNOs to manage expenses effectively.
Power management has become a critical focus, as energy costs have surged by 80% over the past three years. Enfrashare is exploring a range of power equipment, including generators, batteries, and solar solutions, to hybridise sites and optimise energy usage. This strategic approach aims to mitigate the impact of escalating power costs and ensure sustainable operations.
High inflation and rising debt
High inflation has made raising debt extremely costly, which needs to be factored into financial planning. However, operators in the Middle East generally do not need additional cash as their financials are strong, except for a few exceptions. Decisions about where to invest and whether the cash is needed after spinning off or selling towers are crucial. For example, in Eastern Europe, bond repayment deadlines forced owners to sell towers. In Europe, asset sales are often driven by pension funds reaching maturity and needing to exit or operators requiring additional CapEx and capital.
The concept of tower ownership and operations is still in the early stages in the MENA region compared to the European market. Significant education is required for operators to understand the benefits and logistics of transitioning from owning and operating infrastructure to partnering with service providers.
Challenges and solutions
The top three challenges facing the industry are the execution of transactions for consolidations and synergies, the impact of growing inflation on fuel and electricity costs and rising real estate prices with associated high rentals. To address these issues, companies are exploring energy-efficient solutions such as hybrid systems and solar energy to reduce costs and carbon footprint, localising supply chains to mitigate risks and enhance efficiency, and leveraging strategic partnerships and backing from PIF to manage financing challenges and expand footprint efficiently.
Emerging trends and opportunities
Looking at future opportunities in the region over the next three to five years, several trends are evident. One is the privatisation of broadband, which has happened in various forms across the GCC. Another emerging trend is the growth of data centres, driven by the wave of artificial intelligence and the need for advanced infrastructure to support it. Telecom operators and digital infrastructure players are investing heavily in this area.
Optimising business models to enhance efficiency, increasing interest in edge services to support emerging technologies, and significant investment in underlying infrastructure, including fibre networks, are key trends. The government’s asset monetisation programme, which involves privatising state-owned assets, could open further opportunities, although this is a complex process with political and bureaucratic challenges.
Conclusion
The last year has been transformative for the MENA telecom tower industry, characterised by strategic mergers and acquisitions that are reshaping the market landscape. Companies like TASC Towers, TAWAL, and Enfrashare are leading the charge, driven by a commitment to innovation, operational efficiency, and strategic growth. As the region continues to advance its digital infrastructure, the telecom tower industry will play a pivotal role in enabling connectivity and supporting smart solutions across the MENA region.
