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Infrastructure investments fuel the telecom tower industry

This month I published a research report on the telecom tower industry; an industry that I have followed for nearly two decades since its inception in the United States in the mid-1990’s. In recent years, the tower industry has expanded at an incredible rate, particularly as operators seek cost effective network expansion strategies, and network sharing becomes more readily accepted.

Snapshot profiles for the major tower companies for the beginning of August 2014 are shown in Exhibit 1 below. The US is dominated by American Tower, Crown Castle and SBA. American Tower and SBA have been investing internationally. Crown Castle is paying greater attention to growth opportunities in the US market, such as small-cells and distributed antenna systems (DAS).

Other companies like Indu Towers, Bharti Infratel and Viom Networks operate in India, Tower Besama and Protelindo in Indonesia, Helios and IHS in Africa and Aqqiva and Abertis in Europe. The profiles shown in Exhibit 1 are continuously changing as tower companies make new investments. For example, IHS’s recent acquisition (August 11, 2014) of over 2000 towers from Etisalat in Nigeria is not reflected in its profile.

For many industry punters, the value proposition for tower infrastructure outsourcing seems straight forward. It goes something like this…..

Service providers don’t need to own their towers and don’t need to be in the business of managing “heavy iron” infrastructure. Instead service providers can sell their towers to an independent tower company and benefit from a lump sum capital payment and the elimination of tower operational responsibilities.

As for the tower companies, they are in the real estate investment business and are bound to be attracted to tower assets with reliable long term tenancies.

If it were so simple, why do so many service providers, (including high profile players like America Movil), still retain their towers – albeit in many cases through subsidiary companies? Also why do tower companies shy away from so many deals and require such high return expectations, particularly in markets like Africa?

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