Far from just a supporting act, telecoms infrastructure providers are attracting increasing interest from investors as they continue to expand into new territory.
Speaking at the TelecomFinance Conference 2015 on 5 February in London, a panel of experts…
Far from just a supporting act, telecoms infrastructure providers are attracting increasing interest from investors as they continue to expand into new territory.
Speaking at the TelecomFinance Conference 2015 on 5 February in London, a panel of experts concurred that the sector is still rapidly evolving, presenting plenty of opportunity for infrastructure providers and their backers.
Rhys Phillip, chief commercial officer of Nigeria-based IHS Towers, said networking sharing among African mobile operators, spurred by the sharp rise in mobile phone use across the continent, has been the “lifeblood” of the business, enabling it to amass a large portfolio of towers in a relatively short timeframe.
In 2014 alone, IHS agreed to buy or take control of more than 13,000 towers, boosting its total number of sites to more than 21,000 across the continent.
Access to sufficient funding from shareholders has been vital to IHS’ growth. Phillip said that while, in its earlier days, the company had difficulty getting prospective investors “to feel comfortable” with Africa, its rapid organic growth and multiple acquisitions piqued their interest.
While some of its newer backers, such as Goldman Sachs, have required a bit more persuading, Phillip said he believes investors are drawn to the security offered by telecoms infrastructure providers’ long contracts and their experienced management teams.
“People are investing in the management team, who have usually done it all somewhere else before,” he said.
In his view, there is plenty of potential for further investments, particularly in less visible sectors such as mobile payments.
Steve Collar, CEO of O3b Networks, which provides telcos and ISPs with high-speed connectivity in emerging markets, also acknowledged that it was initially a struggle to raise funds, saying it was a challenge to convince potential investors of the value of its distinct business proposition.
However, now the likes of Europe-focused cable giant Liberty Global are on board, he said financing has become relatively easy, although he noted that the company is “pretty aggressive” in its approach.
“Now, there are a bunch of other guys out there who think that landing satellites close to the earth is a great way to deploy infrastructure.”
Like Phillip, Kevin Dean, chief marketing officer of euNetworks, believes that “telling the right story” is key to raising funding, noting that the management team’s track-record is particularly important.
“If the story resonates, it’s really easy to attract funding,” he said, noting that euNetworks has opted for a mix of equity and debt to optimise capital.
Infrastructure sharing
The experts agreed that the increasing popularity of network sharing will provide further opportunities for growth.
Phillip is confident that demand for high-speed mobile data services in Africa will continue to soar. Tower sharing is now established as a sensible and sustainable practice among African operators, he said.
All the same, Phillip said IHS is working to identify other areas of growth.
“Satellite is the next obvious thing,” he noted. “There are combined solutions we can take.”
Stefan Zehle, co-founder and CEO of Coleago Consulting, said the case for sharing LTE infrastructure is also “compelling”, saying the user experience almost doubles in terms of access to greater speeds. The high cost of spectrum is also a key motivator for operators, he noted.
In his view, spectrum sharing represents the final frontier of broader infrastructure sharing; however he is convinced that it is where we are headed, noting that Canada is already there.
Zehle also noted that spectrum is playing an important role in in-country consolidation between operators, citing the European Commission’s handling of the merger between Telefonica and E-Plus in Germany last year as a prime example. The Spanish telecoms group agreed to sell up to 30% of the combined operation’s spectrum to as many as three MVNOs to secure EC approval for the deal. In addition, it agreed to offer spectrum and other assets to a potential new entrant in the mobile space.
Dean too believes there will be further consolidation in Europe but pointed out that the sector will be affected by new entrants with the likes of Google seeking to own their own infrastructure.
“They [Google] will build their own network but they’re doing that understanding what their market and growth is,” he said.
Collar is also convinced of the ongoing growth opportunities within the telecoms infrastructure space, saying there is sufficient demand for different types of providers to flourish.
“We see growth as phenomenal so we only need to capture a small portion of it to do well. We’re not threatened by fibre – there’s more than enough demand for data for us both to succeed.”
O3b is already thinking very seriously about its next generation of satellites, he said, acknowledging that this involves predicting the market to a certain extent given the length of time they take to build.
Moderator:
- Yves-Henri Saliou, managing director, BNP Paribas
Panellists:
- Steve Collar, CEO, O3b Networks
- Kevin Dean, chief marketing officer, euNetworks
- Rhys Phillip, chief commercial officer, IHS Towers
- Stefan Zehle co-founder and CEO, Coleago Consulting
