With a population of 4.78 million and 4.9 million mobile connections, 60% of Ireland’s 4,000 telecoms towers sit in the hands of the country’s three MNOs leaving the remaining 40% in the hands of independent tower companies, broadcast operators and public sector players. With no dominant tower company, the market is ripe for consolidation as ambitious towercos look to get a foothold in the region.
With a population of 4.78 million and 4.9 million mobile connections, 60% of Ireland’s 4,000 telecoms towers sit in the hands of the country’s three MNOs leaving the remaining 40% in the hands of independent tower companies, broadcast operators and public sector players. With no dominant tower company, the market is ripe for consolidation as ambitious towercos look to get a foothold in the region. December’s announcement of the National Broadband Plan, coupled with the consolidation from four to three MNOs following 3’s acquisition of O2, create new opportunities and challenges for towercos in the market.
Who are Ireland’s MNOs and what scale are their networks?
The history of MNOs in Ireland is complicated by a number of mergers and acquisitions and network sharing agreements.
Eircell, 100%-owned by Eircom, was the first MNO in the Irish market. In 2001, Eircell was bought by Vodafone, demerging from Eircom. Vodafone currently has the largest market share in Ireland sitting at 38% with 99% network coverage.
The second MNO to launch in the Irish market was Digifone, owned by Irish billionaire Denis O’Brien. Digifone was rebranded O2 in 2001 following a takeover and then demerged from BT, and was then owned by Telefónica following its takeover of O2 Ireland’s parent company in 2006 (until its recent acquisition by 3).
Meteor Mobile, at the time owned by US company Western Wireless, launched in Ireland in 2001 as the third MNO in the market and then was subsequently acquired by Eircom in 2005, still operating under the brand Meteor. Meteor currently has 21% of the market share in Ireland with 75% network coverage and is the only Irish-owned MNO in the market.
3 (Hutchison) was the latest MNO to launch in the Irish market in 2005 and, up until 2014, held only 9% of the market. Following an acquisition of number two operator O2 from Telefónica in 2014 for €780m, the newly-formed entity currently controls 33% of the market with over 95% network coverage.
The consolidation from four to three MNOs has been further complicated by network sharing ventures set up by each of the operators. Vodafone and 3 formed a network sharing venture called Netshare, which has since been restructured – Netshare is now wholly owned by Vodafone. Prior to O2’s acquisition by 3, O2 created a network sharing agreement with Meteor. The EU has ruled, however, that following O2’s acquisition the network sharing agreement must remain, thus tying together the O2, 3 and Meteor networks.
Who are Ireland’s independent tower companies?
40% of towers in the Irish market are outside the hands of MNOs, higher than the 27% average in Europe. The biggest towerco players are Towercom and ESB Telecoms, each with around 400 towers, joined by six further tower companies, with portfolios ranging from 40 to 113 towers. In addition, state-owned broadcaster 2RN (RTE) owns 150 towers, the Office of Public Works 180 and CIE, the Irish national railway company, 100.
How has MNO consolidation impacted towercos in the market?
Towercos have been affected to varying degrees by the acquisition of O2 by 3. Towercom, whose towers had a predominance of Vodafone tenancies, has felt the impact less than others. Those that had a high concentration of O2, 3 and Meteor have most acutely felt the impact of consolidation as the three networks are now effectively one.
In order to mitigate the loss of tenancies, some towercos are looking at the added value they can bring to their towers to position them as core assets for the MNOs – one of the primary mechanisms being the deployment of fibre to sites.
What tower transactions of scale have occurred in the Irish market?
In August 2015, Coillte, the state forestry agency, sold a total of 113 masts and 400 plots of land (on which Coillte masts and those of third parties, predominantly MNOs, sat) to French investment fund InfraVia Capital Partners. Following the deal, a new entity, Cignal, was created to manage the sites on InfraVia’s behalf. Whilst details of the deal value have not been released by any of the involved parties, rumours indicate this was in the order of €70m. Prior to that, Towercom bought 340 masts from Eircom for €155m in 2007.
Could we see Ireland’s three MNOs divesting towers?
Despite the sale of 340 masts from a cash-strapped Eircom to Towercom back in 2007, MNOs have not to date expressed an interest in the sale of their towers. Whilst tower companies have approached the incumbent MNOs with sale and lease-back proposals, the well-capitalised operators have not yet been motivated to sell.
Prior to the takeover of O2 by 3, observers were watching O2 closely with the belief that its financial pressures may necessitate the sale of towers to raise capital. The recent carve-out of 11,500 Telefónica towers in Spain and speculation surrounding divestment of further assets has brought credibility to this theory. However, since the acquisition by 3, we are unlikely to see a sale in the near future. Similarly, Vodafone, who has yet to monetise many of its towers globally, does not look set to be bucking this trend in Ireland.
There have been no rumours of any further tower divestments by Meteor, although Eircom is now selling its exchange portfolio (including some very valuable urban locations). Potentially once it has run out of unused properties, some commentators believe it could look to sell its 525 towers.
Could we see M&A amongst Ireland’s towercos?
As a highly fragmented market, there exists strong potential for consolidation between Irish towercos. Whilst 2015 saw one transaction of note, no further transactions are currently expected in 2016, although the more acquisitive towercos are keen to engage in dialogue on the subject.
Insiders believe that a sale from a state or semi-state entity could be more likely. An ESB Telecoms tower sale had been considered a few years ago as a means to help reduce state debt. However, with ESB now being in a much better financial position and with strong management in place, a tower sale in the near future seems unlikely. There has been talk that OPW could look to sell some of its towers and some observers believe there is a potential for a sale at 2RN with its assets having been carved out from parent company, RTE. However, to date, there have been no qualified rumours of such a transaction occurring.
What is the National Broadband Plan and what implication does this have on Irish towercos?
In December, a new National Broadband Plan was announced for Ireland to build upon the work of the National Broadband Scheme initiated in 2006. The original scheme, awarded to 3 Ireland, was to provide a minimum of 1.2 Mb of download speed to rural areas; the aim of the new National Broadband Plan is to bring this up to a minimum of 30 Mb. The state has done a lot of mapping and there are approximately 750,000 premises in the catchment area to be covered by the plan.
Companies were invited to enter the pre-qualification process just before Christmas and responses needed to be in before the end of February, after which a formal tender process was opened. Details need to be extrapolated within the plan. However, thinking is that the delivery will follow both a fibre and a wireless strategy, potentially creating requirements for new tower build (as was the case with Coillte’s towers in the original scheme) and also the bringing of fibre to towers (which is something that is currently being planned by some towercos in the country).
Read the full report: http://www.towerxchange.com/towerxchanges-analysis-of-the-irish-tower-market/
