Hardiman Telecommunications Ltd - PowerPoint Presentation

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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