TowerXchange Meetup Africa on 10-11th September in Nairobi, Kenya opened with a strategy panel that explored the biggest challenges the industry is facing and what the path to the future looks like for Africa’s towercos.
Speaking on the panel was Tom Greenwood, CEO of Helios Towers; Kunle Iluyemi, Head of Sub Saharan Africa at IHS Towers; Nicholas Van Slyck, Vice President of Africa & Asia at SBA Communications; Michael Mutiga, Chief Business Development & Strategy Officer at Safaricom; and Estelle Rossouw, Manager of Digital energy Systems at Vodacom. The panel was moderated by Angela Wamola, Head of Sub-Saharan Africa at the GSMA.
The last 12 months have seen continued headwinds, foreign exchange rates hitting particularly hard. Kunle Iluyemi, Head of Sub Saharan Africa for IHS Towers, explained that devaluation and instability have different negative effects on the balance sheet, which needs adapting to, such as stabilising the cost base and tying it to local currency.
However, this is extremely challenging to achieve in Africa, which is highly reliant on hard currency capex spending. Towercos are exploring new and innovative ways to partner with customers to protect against these fluctuations in a way that is sustainable for both parties.
Supply chain issues have also put a strain on the industry, with various factors such as conflict in Ukraine and the Middle East as well as ongoing COVID recovery extending the lead times for key deliverables components. This is easing up, but the impact is still there.
Energy remains Africa’s biggest challenge – and towercos are committed to power
Talking challenges quickly landed on energy; the prevailing headache for the African tower sector. In southern Africa, drought has impacted the region’s reliance on hydroelectric power, particularly Zambia where 70% of grid energy comes from hydro.
The market is not built to support load shedding or alternative power systems, and diesel consumption has skyrocketed. Site fuelling per month has tripled from one to three times, as storage capacity is designed only for back-up power.
In South Africa, load shedding is making a recovery, according to Vodacom’s Manager of Digital energy Systems Estelle Rossouw. In 2023, state-owned grid company ESKOM saw a collapse of its ability to meet energy loads, leading to an energy crisis in what was once one of Africa’s most stable markets for towercos.
ESKOM has since “upped their game” with energy availability now at 80% and a reduction in bottlenecks where transformers were being overloaded, protecting grid resiliency. Vodacom recently analysed their sites and expects a linear downward trend in diesel consumption. However, vandalism of sites and the distribution grid remains high, so some sites will continue to rely on on-site diesel power.
Now that energy resiliency has stabilised, the next plan is how to achieve their net zero targets. Targeting scope 1 diesel emissions are a priority, and Vodacom is exploring solar PV, wind, and alternative options to support sites, but are finding that many new technologies are novel and remain unproven at scale.
Virtual wheeling is an exciting concept, and both Vodacom and MTN have signed deals in the last year exploring partnerships with Independent Power Producers (IPPs), but the regulatory frameworks for power wheeling still need to be ironed out.
AI and data analysis is going to be key to solving Africa’s energy and ESG challenges. As Estelle put it, data analysis will be critical in helping operators understand how each component of their active network is being utilised throughout the day. Identifying areas of energy wastage and inefficiencies in the network can massively help reduce the bill.
Michael Mutiga, Chief Business Development and Strategy Officer at Safaricom, highlighted that energy is their “single biggest opex item” which spiked 40% this year due to fuel prices and inefficiencies in grid distribution. Safaricom has already deployed solar PV on 1,500 towers but want to extend this to as much of their 6,500ish tower network as they can.
An ESCO contract on 3,000 towers is set to be rolled out over the next three years to provide the capex needed to achieve this. Safaricom is also exploring how they can transition to better tower sharing agreements, as the current set-up is still inefficient.
MNOs might be moving to IPPs and ESCOs to help meet their energy needs, but Tom Greenwood, CEO at Helios Towers, explained that power remains a core component of the African towerco service offering.
This goes beyond pass-through and sticking a running generator on every site. Towercos need to have an “armoury of different solutions” to be deployed to meet the nuanced needs of various sites and markets. This can only be achieved= through collaboration and clear communication to ensure the best outcome.
In Tanzania, SBA Communications also found that power-as-a-service is here to stay and is a rock-solid service arm of the towerco model. SBA found that their joint venture with Paradigm Infrastructure, which had power expertise, was critical in the success of their Tanzanian towerco Minara Towers.
Whether it’s partnering with ESCOs, forming joint ventures with power experts or ensuring that senior management teams include members from the energy sector, the African tower industry must maintain a high level of expertise when it comes to energy management.
Open dialogue with governments is key to fostering a supportive environment
Governments are critical in fostering growth and stability in the tower industry. Nicholas Van Slyck, Vice President of Africa & Asia at SBA Communications, outlined how towercos and MNOs together must align with governing entities to help drive sustainability, investment and innovation in the sector.
Nicholas outlined several key pillars that need addressing. Firstly, the world is a competitive marketplace, and countries must follow best practices to attract investment. Policies that support and protect enterprises and investors with clear and transparent processes for permitting and licensing are a prerequisite to creating a healthy environment for towercos to operate.
To meet the continent's rapidly accelerating demands for connectivity, digital access and technology towercos must be able to quickly deploy new sites and have the capacity to explore new solutions to meet coverage and capacity needs.
Harmonisation between central regulators and local governments is also important to create a standardised approach. Reasonable laws around tariffs and permitting fees can massively help reduce the cost of infrastructure deployment.
If governments want to bridge the digital divide it’s going to require many hard assets that need to be imported, which is currently a lengthy and expensive process. Zoning laws are also a challenge, as towercos need to be able to build in all sorts of locations whether public or private, urban or rural, to reduce infrastructure gaps.
Michael shared Safaricom’s experience in Ethiopia, launching as a competitor to state-owned Ethio Telecom (Ethiotel) and the challenges the operator faced in a market that often lacked the right regulatory frameworks for a supportive rollout. Ethiotel had never done colocation before, and the government had a key role to play in opening the conversation for infrastructure sharing. Tariffs on Ethiopian imports remain extremely high, and leading to very high costs for network rollout, in addition to the challenging process of site permitting.
Towercos also need to ensure that regulators are acting on the best interests of their customers as well as themselves to ensure a healthy ecosystem. Kunle explained that ARPUs have been declining in several African markets, and regulators have not allowed MNOs to increase prices. This trend, while keeping data services affordable for end-users, is not conducive to a healthy environment for operators and impacts their ability to generate revenue and meet capex requirements for network expansion.
Deeper towerco-MNO partnerships are required to remain healthy and resilient
In an increasingly volatile world, it’s never been more important for towercos and MNOs to have strong, resilient relationships. Sharing this risk is critical for the ecosystem’s survival, according to Kunle. Everyone wants to push the risks of FX, inflation, interest rates and costs of capital onto another person or party.
Towercos and MNOs need to explore more creative ways to structure pricing models, going beyond a standardised price or billing process. “You need formulas that protect from risk and incentivise customers”. Volume-based or inflation linked pricing can help mitigate these risks, as over time it incorporates FX changes.
Towers and digital infrastructure players need to take a step back and understand the role they need to play for customers, said Tom. Governments, operators and towercos are all working towards the same goal; to ensure Africa has reliable, resilient, and cost-effective data and coverage. This is a shared aim, and the ecosystem needs to have a more focused approach to share the burden.
MNO capex is increasingly stretched, and nearly 50% of towers in Africa remain under MNO ownership, meaning operators are still spending big on operational costs that could be going towards growing active services. There are a multitude of different ways MNOs and towercos can work together to create shared value, whether it’s a full or partial sale leaseback or joint venture.
Helios Towers is in its 15th year and has worked with MNOs as equity partners, a model that has worked well. Having customers actively invested in the business fosters a close relationship and ultimately enables them to monetise their stake before exiting.
Looking forward to 2025 – we must be optimistic
From Safaricom, the domestic outlook in Kenya is positive but not without bumps in the road. The civil unrest experienced in the market over the last 3 months impacted several locations, and power instability caused interruptions, but Kenya continues to be a great market for the telecom sector.
Safaricom is now looking at expanding coverage in 2025, densifying it’s 5G network and addressing network overlap. Power is also a priority, for both resilience and cost-reduction, and as a result the operator wants to create a common tower strategy to help meet these objectives.
Ethiopia has attracted a lot of attention with a potential towerco licence in the works, and Safaricom held no reservations about its intention to bring a towerco partner into the market. The operator has already achieved 50% co-locations with Ethiotel and wants to accelerate the deployment of new towers, which has been around 1,300 sites per year.
From Vodacom, the operator view is that new cloud services and innovation will require a major leap in technology adoption, particularly AI. Pressure to meet ESG targets, not just carbon reduction goals, is also paramount, with Vodacom exploring new partnerships with educational institutions to generate new talent for the industry and empower women in the African telecom sector.
For the towercos, 2023 has been one of the toughest years and these shocks have been felt well into 2024. But the outlook is optimism on the horizon. Towercos have always been optimists and forward-thinkers, especially in Africa where market conditions have necessitated new services, solutions and technology adoption.
But meeting Africa’s digital goals will require more than just towercos, and cross-industry collaboration with operators, governments, suppliers, investors, the energy sector and the wider digital infrastructure community is key to unlocking the future for the continent’s connectivity.
