American Tower talks Asia plans, COVID-19 and the evolution of towercos
The tower giant continues to enhance their Asian presence
American Tower does not need an introduction. For over a decade, the company has been established as one of the leading and most influential players in Asia and globally with a portfolio of over 75,000 sites in India and over 180,000 sites globally. TowerXchange has caught up with ATC’s Executive VP and Regional President Amit Sharma to discuss where the company is heading in Asia, what are the most interesting geographies in the continent and how the company is embracing innovation.
TowerXchange: What has been the impact of COVID-19 on American Tower’s global business? How has your Asia team adjusted to this new world reality?
Amit Sharma, Executive Vice President & President, Asia, American Tower Corporation: The suddenness, spread and severity of the pandemic across the globe has pushed countries and institutions into uncharted territory. However, the telecom sector has seen a sharp increase in traffic resulting from the lockdown, due to the massive increase in wireless broadband demand. Seamless and quality connectivity is critical for work, for homes, business continuity and maintaining essential services. The increased adoption of e-commerce, e-payment and telemedicine are all based on the need to utilise services like video calls, webinars, conferences and e-meetings; and these have driven data demand through the roof.
Demand for fixed and mobile data is surging and has shifted from downtown offices to residential suburbs and even to villages. Digitisation, accelerated by COVID-19, is likely to permanently change people’s lifestyles, even after a vaccine is found or herd immunity is gained. This means the mobile industry will need significantly more capacity in both urban and suburban areas. With spectrum limited and expensive in most countries, this will require more sites both for infill capacity and for coverage.
By 2021, the need for infrastructure is going to increase sharply. Forecasts predict 8.1 billion cell phone users, of which 72% will be smartphone users. The new era of high-speed internet and mobile connectivity will see 5G deployment across the globe over the next decade, and towercos will play a significant role in supporting MNO’s for faster rollouts. This will require towercos to expand passive wireless infrastructure like towers, fibre to the tower/building, Wi-Fi, small cells and street furniture. In the medium term, I expect tremendous growth in demand for tower sites. Robust demand for tenancies on existing sites and new tower sites are benefitting towercos globally.
As a critical service provider, American Tower stands poised to provide the necessary infrastructure to support the growing demand for wireless services around the globe. MNOs have the opportunity to profit from the increased data demand only if they maintain the quality of service, via significant capacity augmentation. They require massive investments to expand their active 4G networks while preparing for or rolling out 5G. This is where neutral host towercos can come in as partners. We can reduce MNO’s CAPEX/OPEX and provide high quality digital telecom infrastructure backbone.
TowerXchange: What is American Tower’s mid-to-long term vision for Asia and what will be the most interesting markets for towercos in the region?
Amit Sharma, Executive Vice President & President, Asia, American Tower Corporation: We are upbeat about Asian markets. Wider connectivity and better networks will become an even greater priority for consumers in large parts of Asia. Basic internet access and mobile data speeds are insufficient to support applications such as video calling, streaming, education and health apps that demand high quality data connections. In order to meet these market demands, further network densification is required. This means that MNOs and their towerco partners need to invest billions of dollars to increase the number of fiberised towers on the ground, on rooftops and on utility poles to offer a true 4G and 5G experience in Asia.
The Asian telecom market has the lowest penetration of independent towercos; only 15-30% of towers are owned by independent towercos in most countries. Independent neutral hosts can provide 25-35% TCO savings to operators. Spinning off tower assets provides MNOs’ balance sheets flexibility to fund the CAPEX sorely needed to provide even robust 4G networks with good quality of service. It also gives them the funds needed particularly for 5G spectrum and associated infrastructure.
There is great room for growth of the neutral host towercos in practically every South Asian and Oceania market, both to acquire existing towers and to build new ones. In general, I am upbeat about opportunities in the continent and believe that the mid-to-long-term outlook for growth in the region remains very positive.
TowerXchange: Asia is a broad market and very few towercos have been able to land in different countries across the region. What are some of the main challenges and barriers when entering certain tower markets in the continent and what have you done to overcome those challenges?
Amit Sharma, Executive Vice President & President, Asia, American Tower Corporation: Asia is not only broad, it is diverse. Each Asian country is unique and has its own set of challenges. The attractiveness of a market is a function of the number of MNOs, data growth, 4G/5G adoption and expansion plans, as well as the regulatory environment. Some countries are dominated by a handful of telecom players, while others have many operators. If you look at the Philippines, you see a country with a population of over 150mn that had only two MNOs until recently, but offers relatively friendly policies on the FDI and regulatory front. Indonesia, a country with +275mn population, and five key MNOs, did not encourage foreign investment in the towerco segment but has just removed this from the negative list. Then you have Myanmar, which went out of its way to attract foreign shareholding and has well-defined tower policies. Also, there are countries like Australia which have largely untapped markets from an independent towerco perspective. There are unique challenges to entering and growing in most Asian markets and towercos need to take the long view, as there are large growth opportunities.
In order to overcome some of these challenges, my team interacts closely with policy makers, regulators and other stakeholders in governments across Asia. We all need to utilise platforms like TowerXchange more effectively, to convey to regulators the benefits of digital infra sharing, and also to provide them success stories based on our experiences and learnings from other markets. Our efforts are showing results in markets like Bangladesh and the Philippines.
TowerXchange: With 5G becoming a reality in advanced markets across Asia, how do you see the role of towercos evolving, and what are some of the new technologies and business models that you are exploring?
Amit Sharma, Executive Vice President & President, Asia, American Tower Corporation: In principle, the conventional towerco model is eminently suited to allow us to evolve into end-to-end digital infrastructure providers not just to MNOs, but also to ISPs, OTT player and Smart Cities. We create a portfolio of telecom assets, either by building infrastructure on our own, or by way of acquisition, and lease them back to the multiple customers with long-term contracts for the operation and maintenance of the site and its infrastructure. This is a win-win model, as MNOs free up cash from their assets, which enables them to focus on their core business of providing a range of services to customers while also allowing them expand their network coverage in a more cost-effective way.
Towercos are increasingly assuming the role of a digital shared infrastructure providers in the telecom value chain. This logical evolution leads to a structural separation of an integrated telco operator into two businesses ’ one that operates a shared network of towers, fibre, DAS and edge data centres, and the other, a customer-facing entity providing a plethora of voice, data and content services to consumers. Towercos are ideally suited to perform the first role and MNOs the latter.
Innumerable studies are attempting to quantify and predict the material impact of 5G and the Internet of Things (IoT). It is evident that 5G will spur innovation across many industries and provide a platform enabling emergent technologies, such as the IoT, to become an integral part of our economy and lifestyle. Therefore, 5G and IoT will make ubiquitous small cells/WiFi and edge data an essential part of the ’Digital InfraCo’ solutions that add support for IoT and edge data, which will help organisations leverage 5G. They will optimise operations and business processes, empower human assets and gain more visibility and control across a vast number of sites over multiple geographies. Going forward, vast new growth opportunities will open up for telecom infrastructure providers.
MNOs across the board have limited funds for passive network investment. In a funds constrained scenario, sharing of active and passive networks assumes great significance as 5G, based on low latency technology, requires a dense network to seamlessly deliver connectivity. These must be enabled through gen-next technologies such as in-building solutions, small cells, fibre and fiberised mobile towers.
TowerXchange: The pace of technological change is increasing rapidly and COVID-19 has only accelerated it. How do you as a company acclimatise to this pace? What does ’leading’ means to you when you are already the #1 company in your segment?
Amit Sharma, Executive Vice President & President, Asia, American Tower Corporation: The world is moving to an ’always connected’ mode, with individuals expecting universal access to voice, data and video whether they are in a building or outdoors. American Tower, as a market leader, is adapting rapidly to meet the needs of both current and emerging new customers without losing focus on our current core offering - macro towers. Globally, new business models and revenue streams are emerging for towercos; the digital infrastructure market is ripe estate portfolio to a digital multi-product, a multi-service platform offering incremental value to existing and new customers. We are committed to using macro towers as the primary infrastructure for 5G deployments. More and more mid-band spectrum is being deployed to support 5G, and network usage continues to grow at upwards of 30% per year, and even faster internationally. Significant additional macro tower-oriented network densification is inevitable. Our consolidated customer base is spending upwards of US$60bn on building out their networks every year. Going forward, they will need even more equipment on more of our sites, as carriers deploy massive MIMO and utilise DSS to optimise their network performance and efficiency.
5G and the surrounding ecosystem will develop rapidly, and new network technologies will continue to evolve throughout our international operations. We expect to have compelling opportunities to extend our core value proposition into creative product and service offerings to expand our total addressable market. One of the key trends driving these opportunities is the continued convergence of wireless and wireline networks. We believe that this convergence, along with rapid digitalisation, network virtualisation and the agility of cloud-native software-defined services will lead to increasing demand for distributed, interconnected global edge compute processing.
’Leading’ is an obligation to capitalise on the opportunities this network evolution is likely to present while focusing on developing effective business models. These will augment the value of our existing assets, expand our revenue base beyond traditional tenants and enhance our leadership role in the wireless ecosystem. At the highest level, our goal is to selectively extend our digital infrastructure core capabilities to further encapsulate neutral hosted wireless connectivity, transport and compute functions as part of our comprehensive American Tower platform. We can then offer tenants an integrated suite of complementary solutions to fit seamlessly within their ever more complex network designs.
TowerXchange: India is your most relevant market outside the US. Could you please offer an overview of the key changes and dynamics that are happening in the country and what will be the impact for towercos and American Tower?
Amit Sharma, Executive Vice President & President, Asia, American Tower Corporation: The Indian market is in turmoil; due to the entry of RJio with a world class, greenfield 4G network which allowed them to crash user prices to previously unthinkable levels. The Supreme Court verdict on the Adjusted Gross Revenue case imposed a further burden of US$20bn on an already burdened telecom industry. Fortunately, the Supreme Courthas granted the industry ten years to pay their dues, thus spreading out the burden of additional payments on a financially stretched industry.
Heightened competition and rock bottom prices caused further financial stress for the telecom industry, which has not been able to meet CAPEX requirements to grow the networks optimally for 4G, let alone planning for 5G. This has driven consolidation in the sector in over the last year. While some operators have filed for bankruptcy or exited the industry, others have merged to improve viability.
Supporting this dramatic change has not been easy, but agile operators have been decisive, offering customers relief packages while working hard to ensure that networks can cope with the surge in demand. The number of mobile broadband subscribers in India has risen to 680mn with an average data usage per subscriber per month of ~13-15GB. In comparison to five Exabytes of Mobile Data Traffic per month in the USA, India’s Mobile Data traffic per month stands at 8.2 Exabytes.
The telecom industry is now stabilising, and green shoots of growth are visible. We expect that the struggling telecommunications sector will breathe a sigh of relief as the average revenue per user, at US$2 per month, is set to see a significant uptick, helped by the tariff hike implemented by all telecom operators in December last year. Rapid digitisation combined with higher margins, offers a massive opportunity to operators like Bharti Airtel to accelerate their investments in network growth. Demand for services continues to spike, but given India’s dependence on wireless traffic, there is enormous pressure on cellular infrastructure. India’s internet consumption has gone up dramatically, the average traffic per day per site is over 600GB. Net traffic witnessed a 30% spike post lockdown, leading to sudden choking of the telecom network across the country. Therefore, the country needs a massive build out over the next three years to support the development of 4G.
We continue to believe that there is a tremendous long-term opportunity in India. We have a very large population, significant demand for mobile services and a wireless sector that has now been reorganised into a viable framework, with three large carriers and a smaller government-owned entity. The government is committed to its Digital India policy, and the AGR issue is now largely settled. To facilitate this acceleration, the Department of Telecommunications and Government will need to collaborate to support the telecom sector to become stronger.
’Today, India is the second largest telecom market in the world, and it has surpassed US and China to become the largest data consuming economy and that too at the lowest tariffs. This transformation is moving India towards becoming a ’knowledge society’, riding on ’Digital Communications’ in true sense,’ said Indian Telecom Minister, Ravi Shankar Prasad. Additionally, introduction of 5G, probably in 2022, will provide a further fillip to infrastructure growth.
We are hopeful therefore that India can return to attractive growth for us, as MNOs reaccelerate their network investments in the medium term. With ~75,000 towers across in India, we believe we are well positioned to contribute to a telecom sector recovery.
TowerXchange: For the last few years, the global tower industry has been closely following the news coming out of the Philippines and Bangladesh. Now, it finally looks like these markets are taking off. Could you provide an update on those countries and your plans there?
Amit Sharma, Executive Vice President & President, Asia, American Tower Corporation: Philippines is probably the largest greenfield/brownfield market in Asia, requiring more than 40,000 new ground-based and rooftop towers. There is a massive opportunity for towercos in the country due three key factors. First, data remains the key growth driver, which accounts for roughly 65% of total service revenues. Mobile data traffic increased 60% in 2019. I am sure this will be much higher in 2020 due to the impact of the pandemic. Secondly, CAPEX spent by the two incumbent MNOs has been healthy. Thirdly and most importantly, the regulator DICT has so far played an important role in mobilising the telecom market, by reducing the number of permits and the overall time required to roll out sites.
On the other hand and despite having the fifth largest population in Asia, Bangladesh has a mobile penetration of only around 50%. Data penetration is also far below that of other countries in the region. Thus there is healthy growth potential. A lot more needs to be done on the ground to offer a true 4G experience in Bangladesh. The country’s MNOs need reliable and financially sound towerco partners, that can also offer the benefit of international and regional operational experience to achieve the desired network performance and meet rollout targets.
We are also excited about new developments in other regional markets like Indonesia, Australia and others. We are constantly reviewing opportunities in these markets.
TowerXchange: Regulatory policies in Asia vary from country to country and can be a big bottleneck for towercos’ expansion strategy. What has been American Tower’s experience while dealing with the regulators in the region?
Amit Sharma, Executive Vice President & President, Asia, American Tower Corporation: Towerco-friendly regulatory regimes are critical for the success of this industry. We have seen significant progress on this front, but a lot more needs to be achieved. Most regulators in the region are still looking at digital infrastructure through the lens of MNOs who regarded this as a strategic asset and few countries have developed policies to support shared digital infrastructure providers that are independent from MNOs. Around 240mn people in Asia lack mobile internet coverage and a further 1.9bn people live within the footprint of a mobile broadband network but are not using mobile internet. I am sure that both the Asian governments and regulators must be aware of these ground realities. With the immense impact of the pandemic on economies and societies, there is a greater need for collaborative leadership than ever before. Cooperation between the mobile industry and policymakers is vital to ensuring long-term digital resilience by improving mobile and data coverage and making digital services universally available.
As I said earlier, COVID-19 may create some additional opportunities based on the incremental need for additional passive infrastructure and MNO investment in network capacity. Once these countries start formulating more business-friendly policies as well as specifically promoting and protecting FDI investments, the Asian market has the potential to increase dramatically.
The Telecom Regulatory Authority of India (TRAI), for instance, has been supportive of IP-1’s. American Tower has been aligning its advocacy efforts in line with TRAI recommendations for Enhancement of Scope of IP-1 within the existing registration framework.
The Philippines Regulator DICT and other government agencies like ARTA have done a wonderful job of simplifying and optimising the entire licensing and permit issuance process. They have cut down the number of site acquisition and tower construction related permits from 26 to less than 10 and reduced the number of days required for permit approval from 9 months to less than a month. There is still a range of actions that policymakers can undertake, like adopting policies that reduce costs in areas such as taxation, voluntary infrastructure sharing and fees.
Other countries like Myanmar and Bangladesh have introduced progressive regulations to promote growth of the independent tower industry. There has never been a more opportune time for governments to initiate policy measures to stimulate demand for mobile and internet services and address the barriers to their usage.
Amit Sharma will be joined by American Tower’s regional CFO, Vijay Agarwal as well as by American Tower’s Chief Business Development Officer Manish Kasliwal at the upcoming TowerXchange Meetup
Asia on Dec 8-9th.
Find out more at http://meetup.towerxchange.com/asia