Airtel Africa and MTN Group have announced a collaboration of fibre and wireless infrastructure sharing to improve network efficiency in Nigeria and Uganda.
Both operators have agreed to access each other's mobile networks, adhering to local regulatory and statutory requirements, driven by a desire to increase digital and financial inclusiveness on the continent.
The agreement will help reduce network costs for both players, with a focus on infrastructure expansion in rural areas. MTN also stated that it is considering fibre and RAN sharing deals, as well as possible collaboration on new fibre rollout if necessary.
Currently the deal only applies to where MTN and Airtel Africa have overlapping markets, but further deals in Congo-Brazzaville, Rwanda and Zambia are being explored. Both operators have also commented that they remain open to collaborate with other operators across all of their markets.
Ralph Mupita, Group President and CEO of MTN Group, commented “We continue to see strong structural demand for digital and financial services across our markets.
“To meet this demand, we continue to invest in coverage and capacity to ensure high-quality connectivity for our customers. That said, there are opportunities within regulatory frameworks for sharing resources to drive higher efficiencies and improve returns.”
Infrastructure sharing is moving beyond the passive layer
Infrastructure sharing has become a mainstay of Africa’s telecom sector, improving operational efficiencies and reducing costs; a hot topic as current devaluations, access to power and supply chain challenges continue to drive up costs of capital.
Towercos have become a key driver in improving efficiencies on the passive layer, helping reduce costs and carbon footprint, and expand coverage for mobile operators. In Africa, towercos also provide power-as-a-service in most markets.
However, operators have mostly retained ownership of their active networks, which is becoming increasingly expensive to manage as technology adoption accelerates and the continent rapidly shifts towards 4G expansion and emerging 5G rollout.
This is particularly challenging for rural expansion, where it can be challenge for operators to guarantee clear returns on investment, and are often mandated to cover by regulators.
Airtel Africa’s CEO Sunil Taldar explained that one big reason for the active sharing agreement is to “provide a more robust and extensive digital highway to drive digital and financial inclusion at the same time avoiding duplication of expensive infrastructure to drive operational efficiencies and benefits for our customers”.
A similar deal was recently announced by Africa’s two other major mobile operators Orange and Vodacom in the DRC, who are forming a new joint-venture towerco to build, own and operate a network of rural mobile base stations.
Driving rural coverage is one of Africa’s biggest development goals, and is being extensively pursued by governments, who in turn are pushing operators to hit certain coverage goals. While satellite direct-to-device services will have a major role to play in future, many constellations are not yet active, and the cost of service is currently far higher than what a terrestrial network can provide.
The network-as-a-service (NaaS) model is proving to be an effective solution, with operators such as Orange, MTN and Airtel all signing agreements with players such as AMN, NuRAN, Vanu and iSAT Africa.
But the active sharing agreements announced by MTN, Airtel, Orange and Vodacom all suggest that further action needs to be taken beyond utilisation of towercos, netcos and satellite operators.
A shake-up for African towercos?
Active sharing will have wide repercussions for the industry, although it remains unclear as to what the full extent of this sharing agreement will look like.
One major negative consequence of active sharing is that it will reduce demand for both new tower infrastructure, and colocations. Operators will be able to achieve their coverage goals by accessing the active equipment of competitor players, instead of working with a towerco or netco to deploy new infrastructure.
A similar trend is developing in Latin America, where active sharing is gaining momentum to manage high costs of network expansion in large and diverse markets such as Mexico, Argentina and Brazil. Towercos have consequently faced the challenge of lower site utilisation with the potential for reduced tower builds.
The sharing of active equipment will also reduce the need to deploy multiple antennas on existing sites, reducing colocations. This could have implications for African towercos who are focusing on lease-up and tenancy ratio growth to improve EBITDA margins and drive up valuations of existing assets.
Active sharing may also incentivise the netco model over traditional passive sharing towerco model, as the colocation efficiency savings a towerco offers to multiple tenant operators becomes less important.
The netco offering also includes RAN deployment and maintenance. Players such as AMN and Vanu can utilise software to enable their RAN networks to become plug-and-play for multiple operators, meaning they can quickly accommodate network sharing.
However, active sharing speaks to a more systemic challenge operators in Africa are facing. Financial health for the telco sector has been in decline as costs of capital increase and CAPEX becomes stretched. Key markets such as Nigeria have become hugely burdensome for players like MTN, who announced a loss of 400bn Naira in their latest financial results.
Active sharing can help operators better manage their expenditures, in turn improving their ability to efficiently allocate capital. There is still an enormous mobile infrastructure gap, and huge demand for digital services, that towercos will play a key role in facilitating.
