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Hardiman Telecommunications Ltd
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Financial, Strategy and Technology Consultinghttp://www.telecoms.net
100 Pall MallSt James’London SW1Y 5NQ+44-20-3239-9849emea@telecoms.net
One International Finance CentreCentralHong Kong+852-8199-0361asiapac@telecoms.net
Keynote Presentation – TowerXchange Africa 2015Future Perspectives on African TowersEnda Hardimanhardiman@telecoms.netSeptember 28 2015
Document Reference – HTL-M1-TOWERS-EPH28092015vRSlide2
Major MNOs and TowerCos
Consolidation DiscontinuitiesSlide3
Bharti
Etisalat / MarocTel
MTNOrangeVodacomOriginal Combined Installed Base of 100,000 Towers36,000 Now Sold or in Sale / Leaseback, or SharedAll Seeking Sale, Joint Ventures
American TowerEatonIHSHTNHTACombined Installed Base of 45,000 Towers“Low Hanging Fruit” Phase ConcludingSmaller Transactions in Prospect
Two “Big Fives”
MNOsTowerCosSlide4
Year
Where
Seller
BuyerTowers
TransactionPer Tower
Type2015Egypt
Mobinil
Eaton
2,000
$131,150,000
$65,575
SLB
2014
Rwanda and Zambia
Airtel
IHS
1,113
$181,000,000
$162,624SLB2014NigeriaAirtelAmerican Tower4,800$1,050,000,000$218,750SLB2014Ghana, Niger, Burkina Faso, Kenya, Uganda, MalawiAirtelEaton3,500$612,500,000$175,000SLB2014NigeriaMTNIHS9,151$882,000,000$96,383JV - IHS 48%, MTN 51%2014NigeriaEtisalatIHS2,136$485,000,000$227,060SLB2014Congo BAirtelHTA300SLB2014Rwanda and ZambiaMTNIHS1,269SLB2013TanzaniaVodacomHTA1,149$75,000,000$65,274SLB with Direct Investment2012Cameroon and Cote d'IvoireOrangeIHS2,000MLL2012Cote d‘IvoireMTNIHS931$141,000,000$151,450SLB2012CameroonMTNIHS827$143,000,000$172,914SLB2012UgandaWaridEaton400SLB2012UgandaOrangeEaton300SLB2011UgandaMTNAmerican Tower1,000$89,000,000$89,000JV - ATC 51%, MTN 49%2010TanzaniaMillicomHTA1,020$80,000,000$78,431JV - HTA 60%, Millicom 40%2010DRCMillicomHTA729$45,000,000$61,728JV - HTA 60%, Millicom 40%2010Ghana, Niger, Burkina Faso, Kenya, Uganda, MalawiMTNAmerican Tower1,876JV - ATC 51%, MTN 49%2010South AfricaCell CAmerican Tower1,400$200,000,000$142,857SLB with acquisition rights2010NigeriaStarcommsSWAP407$81,000,000$199,017SLB2010GhanaVodafoneEaton750MLL2010NigeriaVisafoneIHS800$67,000,000$83,750SLB2010NigeriaMultilinksHTN400SLB2010GhanaMillicomHTA750$54,000,000$72,000MLL
More than $4.3b Deployed84% of Towers Sold Were Sold by the Big Five MNOs – 36% of Big Five Towers Now Sold – 50,000 Remaining99% of Towers Acquired Were Acquired by the Big Five TowerCosFew Countries Feature Multiple Tower Operators
The Two “Big Fives” Dominate Towers Transactions to DateSlide5
There are Only MNO Three Positions Worth Having
5
StrongMarket ShareUsually 25% - 35%Strong in Specific Market SectorsCapturing Selected Market Sectors from LeaderARPU Consistent with Income(s) of Decile(s) Addressed
Usually Operates NationallyMay Have Prioritised RegionsContenderMarket Share Usually 12% - 15%
Recent GrowthStrong in Specific Market SectorsHas ITSELF Defined and Exploited Specific SectorsClear Strategy to Address Other Market Sectors
May Operate NationallyUsually Has Prioritised RegionsLead InnovatorDominantMarket ShareUsually 40%+Present in All Market Sectors
Not Losing Market Share Selectively by Sector
ARPU Consistent with GDP per Capita to 15% of Household Income by Decile
Operates Nationally
Leader
Viable – All Africa
Viable – All Africa
Viable In Very Specific Instances OnlySlide6
MTN
Orange
Vodacom
Bharti
Etisalat / MarocTel
Mkt Posn
Mkt Share
Mkt Posn
Mkt Share
Mkt Posn
Mkt Share
Mkt Posn
Mkt Share
Mkt Posn
Mkt Share
Benin
1
58%
228%Botswana 170%230% Burkina Faso 139%318%Cameroon154%241% CAR 232% 318%Chad 169% Congo-B226% 155% Cote d'Ivoire235%136% 425%DRC 58%234%138% Egypt 237% Equatorial Guinea 178% Gabon 152%212%Ghana145% 313% Guinea 153%143%2 Guinea Bissau 173%247% Liberia154%
Kenya
4
3%
2
40%
Lesotho
1
80%
Madagascar
329% 140% Malawi 239% Mali 155% Mauritius 153% Morocco 229% Mozambique Niger 228% 156%49%Nigeria144% 221%414%Rwanda160% - Senegal 157% Sudan - North230% 1 Sudan - South230% 1 Sierra Leone 323% South Africa236% 152% Swaziland1100% Tanzania 137%230%418%Togo 226%Tunisia 316% Uganda143% 230% Zambia240% 145%
MNO Risk Profile – 38 Countries of the Big 5Slide7
African Regions With More than 3 Operators, Big Five Status
Bharti
Etisalat / MarocTel
MTN
Orange
Vodacom
Secure in Market Shares
MUST Enhance EBITDA
Is in Trouble
Secure
Must Rationalise
SecureSlide8
Conclusions re Consolidation
Difficult to see Future for Etisalat / MarocTel
Bharti Will Probably Improve EBITDA, and Remain
Orange will Likely Rationalise, and Remain in Strategic RegionsMTN and Vodacom Seems Secure
Growth by Acquisition Could Lead to a “Glut” of TowersCompetent Regional Players Could Gain Enhanced Mass
EconetMillicomLTE PlayersMore Positive Vista for Towers in GeneralFor Leaseup Rates in ParticularSlide9
Infrastructure Sharing
Technology DiscontinuitiesSlide10
Considerations
Fundamental Market Economics
GDP, Penetration, CeilingUnderlying EconomyDemographics, Wealth DistributionTower LocationsCoverage – Current Bands
Coverage – Intended BandsVoice Traffic TrendsData Traffic TrendsTRx CapacitiesSectorisationCompetitive Tower OverbuildTower and Antenna DemandRationalisation ScenariosColocation Scenarios
Build-to-Suit ScenariosTenancies and Lease-up DemandRevenue PotentialScenario and Sensitivity ModellingRisk QuantificationRisk Mitigation StratagemsRefresher – How TowerCos Make Money
OutputTenanciesLeaseupRevenueOpEx (From Tech and Op DD)CapEx (from Tech DD)PerformanceScenariosSensitivitiesRisksRisk Mitigation
Monetisable Categorisations
A
B
BTS Zone
A
B
Overlap Zone
A
B
A
B
Rationalisation
ColocationOverlapBuild to SuitSlide11
Dominant Model - Four Types of Passive Tower / Site Sharing
Also illustrating, for completeness, possible active backhaul sharing
Current Models
Relatively Low-TechWell EstablishedWell UnderstoodSlide12
Active Infrastructure Sharing – Shared RAN and 2G/ 3G Shared Backhaul Cases
Business Logic is Clear
Gaining Favour with RegulatorsThreat to Current Tower ModelsBut Opportunity for TowerCos –UpskillRadio EngineeringTransmission ProvisionEnd-to-End SupportIncreased MarginsSlide13
Active Infrastructure Sharing – 2G / 3G Shared Transmission Backbone Case
Noteworthy
MTN’s recent deal with Liquid TelecomAreas of Possible Competition / OpportunityNode sitingDark fibre spansManaged Network ServicesSlide14
Shared Transmission Backbone
Elements of Radio Access and Backhaul May or May Not be Shared
Unshared Core Elements – Network A
Unshared Core Elements – Network B
Shared OMC
Shared VAS Platforms
For Completeness – Full Network Sharing – 2G 3G CaseSlide15
LTE Vista
Long Term
Sub-$20 HandsetsTactical RRU SitingNew Radio PlanningFibre Connection – Short-haulRecastingFibre Connection – Long-Haul
Value of Individual TowersTowerCo Business ModelsRegional PlansMedium TermStrategic Acquisitions by MNOs
Penetration of Medium Market SectorsComplementary to Fibre InitiativesDemand for Tower Space900 MHz1800 MHz (especially)
2600 MHzShort TermPenetration of High Market SectorsComplementary to Fibre InitiativesDemand for Tower Space900 MHz1800 MHz (especially)
2600 MHzSlide16
ConclusionsSlide17
Conclusions
Consolidation is Imminent, Especially in Central Africa
Uncertain Future for Orange and Etisalat / MarocTelBharti Must Enhance PerformanceCurrent Mid-Ranked Performers May Enhance PositionsLimited, but Clear Opportunities for Niche PlayersSmaller Tower Deals Will Predominate
Ferment Will Require Rigorous Zonal AnalysisTechnical Discontinuities Open Upskilling OpportunitiesLTE is in Prospect, but Not an Immediate ThreatMore Complex Businesses, Potentially Higher MarginsMNOs
TowerCos