Panellists:
Arthur Akopyan Partner, UFG Private Equity
Chuck Green CEO, Helios Towers
Terry Rhodes Co-Founder and Director, Eaton Towers
Jussi Hatonen Investment Officer, New Products and Special Transactions, European Investment…
Panellists:
- Arthur Akopyan
Partner, UFG Private Equity - Chuck Green
CEO, Helios Towers - Terry Rhodes
Co-Founder and Director, Eaton Towers - Jussi Hatonen
Investment Officer, New Products and Special Transactions, European Investment Bank - Darragh Stokes
Managing Partner, Hardiman Telecommunications (moderator)
Outsourcing infrastructure is set to be a major driver of telecoms deals this year, particularly in emerging markets like Africa where there are now more towers up for sale than there are buyers for them.
Once considered prized strategic assets, mobile operators around the world are increasingly looking to bring in third parties to run their ‘dumb pipes’ – or even share them with rival players.
In Europe some see so-called active sharing as the only way to consolidate their businesses as regulators heavily scrutinise operator mergers. But it is the prospect for more tower outsourcing that will have dealmakers hot under the collar.
Terry Rhodes, co-founder of Eaton Towers, told TelecomFinance 2014 Conference’s infrastructure panel how the supply of sites in Africa is now exceeding what local tower companies like his can meet, with around 40,000 towers on the block.
“None of us can do 40,000 towers, so if there is anybody out there wanting an equity or debt play in this market now is a good time to come and talk to us,” he told delegates.
“There’s room for more financial institutions, there’s probably not room for more tower companies – we’ve done all the ground work.”
He was backed by Chuck Green, CEO of arch rival Helios Towers, who agreed Africa is set for an unprecedented year of tower deal activity. And it’s a trend he sees expanding across the world as operators begin to realise the assets are not strategic for telcos but a distraction.
According to Green, although active network sharing is a gleam in the eye of MNOs, and a prospect they are always flirting with, it is not something they will be taking up in a big way in 2014.
“Operators worldwide don’t trust each other, and that’s why they don’t share their towers,” he reasoned.
Indeed, tower outsourcing is already very strong in the US, and over in Europe the sector has seen its first sales in Spain and France, while portfolios are also being reviewed in countries such as Austria and Italy.
Simplicity is the key
But even as their African businesses grow in dominance, Rhodes and Green agreed it is still too early to add complexity by following in the footsteps of companies such as Arqiva, the UK’s leading communications infrastructure group, which also offers value added services from broadcast to wifi networks.
For fellow panellist Arthur Akopyan, a partner at the UFG private equity firm that helped set up Russian Towers, simplicity is also the key to growth.
He told how Russian Towers had experimented with “street furniture”, such as attaching telecoms products to lampposts, but that it tends to stay away from venturing into other businesses.
“That can very easily scare our customers,” he said, with the same applying to deals to offload the towers themselves.
He said: “In Russia in particular it’s important to keep things simple, because to a large extent the concept of infrastructure sharing and outsourcing is still meeting a lot of resistance.”
Throwing in an investor perspective to that end, Akopyan highlighted how predictable revenues and stable businesses are crucial in how funds see towers as reliable and safe infrastructure plays.
However, EIB’s Jussi Hatonen cautioned that the telecoms market still faces more volatility than other infrastructure investments such as utilities or roads.
“If you look at telecoms … there you are exposed to market risks to begin with, then regulatory risks, and to add to that is the technology risk,” he said.
Even still, with the sector generally promising higher returns and tower deals set to spread globally as pressured operators look to monetise noncore assets, the market will have plenty to offer investors this year.
