Managing telecommunications infrastructure such as cellular network towers can be tricky. This is especially the case in those African countries where power supply cannot be guaranteed, and where towers require back-up generators and batteries, making them more expensive to run than anywhere else.
To navigate tough competition in the mobile industry, telecom firms have begun to outsource core infrastructure.
Towers are key assets for these companies, and it took years for them to establish a network that provided optimal coverage for users.
By outsourcing, firms have reduced costs and even helped raise money.
The tower management industry in Africa has experienced steady growth in the past 10 years and network operators have slowly become more receptive to handing over their passive infrastructure to third parties.
Some firms are saving up to 30% in operational expenses by outsourcing towers (which can be leased to multiple companies at once). This is despite towers costing more to run on the continent than they do in other parts of the world.
Four companies dominate the tower management industry in Africa and the Middle East: HIS Towers, American Tower Corp, Helios Towers Africa and Eaton.
IHS, which owns over 24 000 towers, recently expanded its business by acquiring Helios Towers Nigeria. ATC has 10 000 towers in Africa, according to TowerXchange.
Tower sharing has put the emphasis on quality of services, says Africa Analysis MD Dobek Pater.
Network operators such as Vodacom Tanzania, MTN, Bharti Airtel and Etisalat have recently sold some of their towers to tower management companies.
Some sell towers only to lease them again.
Others, like MTN, have sold towers to joint ventures in which they own a stake. MTN has formed joint ventures in Ghana and Nigeria and will make an income from towers it has sold to those businesses.
Pater says telecom network operators outsource towers to focus more time on running their core business of being network operators, notproperty owners. "Managing passive infrastructure [like towers] is not, and should not be, a key activity of an operator," he says.
"Operators should focus on running active networks and providing services."
Myhan Naidoo, Africa technology, media & telecommunications sector leader at EY, says the establishment of tower management companies has resulted in lower barriers to entry for smaller telecom companies and mobile virtual network operators. "Outsourcing to tower management companies enables faster go-to-market and means lower capex costs. Also, telecom companies can focus on core competences," he says.
It took years for mobile network operators in Africa to embrace tower sharing. Pater says that historically the concern has been that those first to the market prevented competitors from deploying networks more quickly in some areas and competing for the same customers.
With tower sharing, Naidoo says, telecom companies have less control over their use. However, the benefits of sharing outweigh this.
According to a report by TowerXchange, Nigeria has the largest tower market in sub-Saharan Africa. Tower management companies operating in that country have proved their ability to deliver 99.9% uptime, even with challenging grid conditions. "Nigeria is not just a benchmark for African towers, it’s proof of the efficacy of the independent tower company model in any emerging market," says TowerXchange.
But not all markets are lucrative. In SA, cost savings are harder to realise.
Here, towers have lower operational costs and there are few operators.
Costs of maintenance, rentals and electricity are considerably lower in SA than in other African nations.
Cell C is the only SA operator to have sold its towers, to ATC five years ago, in a bid to raise money.
Just 8.7% of the estimated 30 000 towers in SA are in the hands of tower management companies.
Telecom companies could also explore sharing of active infrastructure such as switches and antennas.
Regulation has limited this, and technology is not always compatible, which hinders this type of sharing.
India’s telecommunications authorities allowed for sharing of active infrastructure this year for the first time, which is expected to reduce costs.
Some tower companies have sought to diversify by owning infrastructure installed on rooftops to boost coverage.
In SA, TowerXchange says such infrastructure is becoming important as the demand for data in urban areas continues to grow.