The telecommunications industry is now witnessing the era of the TowerCo. The recent shift in telecommunications infrastructure management is being driven by a number of different factors: changes in the financial needs of the large telco providers; technological advancement; and increased consumer demand. These factors haveall been instrumental in the emergence of TowerCos. There are two main types of TowerCo models: those that have been hived off from telcos and independent TowerCos. The timing of this rise has proved advantageous for MNOs as TowerCos offer them a key efficiency lever, giving them the opportunity to optimize CapEx, and allowing them to focus more on their core business and transformation. By alleviating telcos of the responsibility of tower management and providing them with a significant financial boost from the resulting capital, they can now devote more of their efforts to increasing coverage – particularly in rural areas – and investing in new technologies such as 5G.
TowerCos are also beginning to think more creatively about how they can better support their MNO partners by maintaining the neutral network infrastructure that they rely on, and tentatively expanding into more diversified and specified offers.
A strategic partnership
Site acquisition has traditionally been a painful aspect of owning and running a network. MNOs spend a lot of time dealing with the legal aspects of identifying a suitable site and addressing right of way issues (RoW): from antenna placement and physically gaining access to a site, to running the civil engineering project to prepare the site to host the telco equipment. Only once all these processes are complete can they start to deploy the required network components and begin to set their sights on site ROI.
But there’s a solution to this. Over the last 20 years, TowerCos have emerged as intermediate actors by directly dealing with everything from site acquisition to civil engineering, and offering MNOs a turnkey solution for site access.The independent TowerCo business model is a classic example of not only working as an enabler for MNOs but also a source of long-term value creation in the following manner:
- Leaseback the passive infrastructure following the divestment of site acquisition operations, thereby continuing the existing passive infrastructure availability without any interruption to operations
- Roll out new towers for coverage and capacity augmentation
- Independent TowerCos specialize in neutral host, passive telecom infrastructure such as mobile towers; sharing of towers by multiple tenants reduces the cost of operations for mobile operators thereby reducing consumer price
- Undertake end to end operations and maintenance of the towers
- Facilitate FTTH (Fibre to the home) and FTTT (Fibre to the tower)
- Service Assurance through tower operations center (TOC) and Network Planning on outsourced basis: Long-term investment in the form of private equity underpins the TowerCo model in Europe leading up to enhanced M&A in the sector
And it’s not just MNOs that get to benefit. The advent of TowerCos is also beneficial to land and real-estate owners in that it creates a single point of contact in relation to a site being made available to multiple MNOs. In this respect, TowerCos operate as neutral infrastructure hosts. This is particularly relevant in areas where space is limited, such as indoor venues, shopping centers, stations and so on. The ability to optimize infrastructure provision and being able to host multiple operators’ networks can have many benefits. From being more energy efficient (common power supply, cooling infrastructure) to lowering the environmental impact (fewer masts, cabinets) of network deployment. The model is similar to and complements what has traditionally been known in the industry as RAN share.
If in the early days TowerCos were mostly focused on the task of site acquisition, today they have grown and expanded their offering. The growth of 5G is helping to strengthen the tower company asset ownership model. Given that MNOs continually struggle to maintain profitability due to constant pressure on margins and rising costs, their ability to afford big CapEx expenditures with longer ROI curves becomes more and more challenging. As a consequence, MNOs turn to OpEx models for a quicker time to revenue.
Helping to overcome a new era of network complexity
5G promises ultrafast speeds, greater capacity, and ultra-low latency characteristics that will enable MNOs to offer connectivity reliable enough to support critical applications – but not everywhere or to everyone. MNOs will assess the business case for where such services should be made available. As part of their strategy, they may be contemplating the deployment of 5G high-band sites. Naturally this requires a re-evaluation of how those parts of the network are built, as providing coverage with 5G services at the high band requires antennas to be closer due to increased signal attenuation. Today there is also greater scrutiny placed on the tower infrastructure that MNOs are having to install to deliver 5G. Site acquisition is an involved and protracted process that is made more difficult as new waves of environmental regulations introduce more stringent requirements in some parts of the world.
Rolling out 5G doesn’t simply involve antennas. The ultra-low latency services that 5G will be able to offer also depend on the availability of edge compute infrastructure, a capability that is ideally located in the proximity of the radio access sites. As seen with the radio infrastructure and the transport backup infrastructure, TowerCos are developing their offering to also include edge infrastructure support, leasing its capacity to multiple MNOs rolling out their 5G services.
The role of radio planning
The development and maturity of 5G networks over the next few years will have important implications for 5G radio planning. Effective planning on the placement of infrastructure is essential to ensure the network is available and with the required grade of service according to an objective. But that objective and plan to get there needs to make business sense. TowerCos allow operators to forgo initial infrastructure investments, and as a result, makes a more compelling business case for more challenging spaces, such as rural areas.
Operating 5G in the high band presents new challenges because of the effect of reduced signal propagation. To provide coverage at those frequencies will require a higher density of antennas. TowerCos represent a viable approach to accessing new sites. This may also drive a re-org in terms of how existing network layers are configured to provide their services.
A new TowerCo landscape
TowerCos are proving themselves as a critical ally of MNOs and they are fast becoming the enablers of more pervasive nationwide connectivity. They are also helping MNOs achieve more cost-effective cell site expansion: resorting to a TowerCo delegation model allows them to address the strategic technological evolution represented by 5G while also easing the financial pressure of the investment required to get there. This can also help an operator to gain the competitive advantage that is key in ensuring that they are recognized as the reference provider for those new services.
In conclusion, it has to be said that the independent TowerCo business model is still evolving in Europe and offers a huge opportunity to all stake holders. While the share of independent TowerCos in Europe has increased in recent years from 13 percent in 2014 to 17 percent in 2018 and 35 percent in 2021, it still remains low in comparison with other regions globally – 90 percent in the US, 52 percent in India, 55 percent in Central/Latin America. Needless to say that a further increase in Europe would help deliver the benefits of cheaper and more pervasive mobile networks thereby improving quality of service to the consumers. As per leading consultancy firm EY: “A typical location of a wireless network operator (also point of presence) managed by aTowerCo is circa 40 percent more efficient than one managed by an MNO, resulting in economic savings of €31b across Europe between 2019 and 2029.”
