IPT PowerTech: the evolution from product provider to one stop shop and now ESCO

When and how should power system providers invest in overhead and back their products with an end to end service proposition? And when should they supplement that proposition with zero-capex, ESCO business models? This is a journey IPT PowerTech have taken over the last 20 years: their business model has evolved as fast as the business has expanded geographically.

TowerXchange: Please introduce IPT PowerTech to our readers.

When IPT PowerTech was established in 1993 we were not a telecom service provider, but a provider of automotive and specialty batteries. As the telecom sector picked up in 1995-96, we thought we could add a lot of value so we started selling batteries to the telecom sector. We expanded into selling power systems in late 1990s, and later added site construction services, telecom services, and managed services and maintenance to create a one stop shop for telecom infrastructure equipment and services.

We made a strategic decision to become one of the few companies in the region, if not the only one, to combine product R&D and manufacturing capabilities to ensure optimum delivery. That combination of products and services together enables us to provide the maximum benefit to our customers.

Our journey has been an evolution from being a regional, Middle Eastern power systems integrator and batteries vendor, expanding into 11 countries on three continents with 1,700 employees across two main divisions. Our power division provides a wide range of power products for telecom sites; from batteries to power systems, hybrid systems, power generating sets, energy efficient solutions, and our own enclosure manufacturing and assembly. Our telecom services division provides managed services, with three main pillars: construction – the building of telecom sites and the laying of optical fibre; maintenance and managed services; and telecom installation and network services.

While some suppliers sell energy systems with a certain promise of efficiency, it is all too easy for clients to struggle to achieve that efficiency in the field. IPT PowerTech provides a single point of accountability – we put our money where our mouth is.

TowerXchange: The perception is that telecom product development and services are very different businesses with different P&Ls – how have IPT PowerTech managed that combination from a corporate financial point of view?

One of IPT PowerTech’s strengths is that we are self-funded which gives us freedom in decision making. Naturally, we take well calculated risks.

The way we run our managed services business has delivered a very consistent balance sheet. We sign long term contracts over three, five or ten years. Because of our focus on operational excellence in delivery, our financial risks are minimised. Yes there is a lot of overhead in managed services compared with pure product development, for example we have had to build a significant workforce to manage more than 3,500 sites in Africa, but we find that if we excel operationally, the business is in a good place in the medium to long term.

Our diversified portfolio of offerings, coupled with our geographic diversity in the 11 countries where we operate, and the 40+ countries where we sell our products, stabilises our financial statements and risks of deviation. We have seen geographies, or offerings slump in years, and are picked up by other geographies and offerings, and the cycle continues. That diversification puts us in a well-balanced situation, whereby we are less affected by the geographic volatilities.

TowerXchange: What is your geographical footprint?

The headquarters of IPT PowerTech Group is in Beirut, Lebanon. We operate through five commercial brands, all fully owned: IPT PowerTech, Linfra, PCT, PowerTech, and Stratum Enclosures. We have operations in 11 countries. In the Middle East we have operational offices in the Kingdom of Saudi Arabia (KSA), Iraq, Syria and Lebanon. We recently acquired Linfra to expand our North African footprint – we operate in Algeria and Morocco. We’re in Nigeria and Ghana in West Africa, and in Afghanistan and Myanmar so far in Asia, with plans to expand further. We also have our own manufacturing facilities in Romania and Lebanon.

While we have an operational presence to deliver telecom services in each of these countries, our solutions and products have been sold to over 60 operators in more than 40 different countries.

TowerXchange: Do you have an appetite to expand into new countries should opportunities arise?

It took us less than a year in Myanmar to create a company, recruit top notch executives, secure a long term contract for provision of power products and energy services, and become fully operational. The same applied earlier in Afghanistan, and in many African countries like Nigeria.

So we are willing to invest and expand into new geographies, as long as that growth is profitable and aligned with the strategic direction of the business.

TowerXchange: Please would you contrast the typical energy equipment and service requirements in a market like Myanmar, where grid power is neither extensively available nor reliable, with a market like KSA where one would imagine cell sites have much less complex backup power and maintenance requirements?

These markets present very different kinds of challenges. Myanmar is a fabulous country which has been developing steadily recently. However grid connectivity remains a challenge for the telecom sector. Today the grid does not reach all the villages – perhaps 20-30% of sites are grid connected, and often the grid is unreliable. But the electricity grid in Myanmar is growing steadily through public and private investments, with projections that over the next ten years we could see 50-60% of telecom sites connected with high quality grid.

This requires that we overcome a lot of challenges in harnessing energy efficient solutions that reduce diesel consumption. The impact of high energy opex is considerable, particularly in countries where ARPU is low, thus the need for energy efficient power solutions with the lowest TCO possible.

The President of Myanmar recently announced a state of emergency in four states due to flooding. Markets like Myanmar bring with them particular risks due to their geographical location and climate. As such, it’s essential that our teams are distributed throughout the country to ensure mean time to respond (MTTR) is reduced to the minimum economically possible in order to maximise uptime.

In contrast the challenges in KSA are completely different. Power is more stable, over 90% of sites are grid connected, but in KSA the challenge is the large geographical area – balancing resource allocation to achieve targeted MTTR whilst delivering a profitable service. Like in any market, SLAs and KPIs are differentiated according to the importance of each site – so it’s critical to negotiate reasonable agreements that take into account logistical challenges.

TowerXchange: How would you characterise the tower and tower power market in MENA, where the towerco business model is only starting to be adopted, relative to the more mature towerco market in SSA?

The last five years have seen a revolution in SSA telecoms – IHS, Helios Towers Africa, Eaton Towers and American Tower have transformed the market with a very positive impact for themselves, for their MNO counterparts and for the environment as they increasingly rollout energy efficient solutions that are more eco-friendly than the previous 24/7 operation of DGs.

Once this business model comes to MENA there will be a change in the status quo. But the energy logistics challenge does not exist in the Gulf region, even in North Africa; in Algeria and Morocco the grid is significantly better than in most countries in SSA.

TowerXchange: As emerging market telecoms evolve toward ‘energy as a service’ business models, do you see IPT PowerTech evolving into an ESCO and selling energy by the kWh?

This is at the heart of our strategy. IPT PowerTech has evolved from a product company, adding services, then combining products and services, and over the last years we’ve been talking about opex models to sell energy by the kWh. We have already started offering kWh propositions – providing energy to a certain number of sites on a kWh basis, using a zero capex, opex business model.

In fact IPT PowerTech is the first company to offer an opex business model in Nigeria five years ago. We went into Airtel after their acquisition of assets from Zain offering a kWh model, but the concept was ahead of  its time – it was not as exciting as it is today.

We believe IPT PowerTech is most suited to offering opex business models given that we develop, manufacture, install and maintain our own solutions – we have the faith in ourselves, in our products, in our management, and in our field workforce to sell energy by the kWh – you need to have that belief because you’re taking all the risk on your back.

TowerXchange: I understand that IPT PowerTech has worked with several of the leading tower companies in SSA, including American Tower, IHS and Helios Towers Africa – are the towercos investing substantially in energy efficiency programmes and hybrid energy yet, or does the focus of your work with them remain on maintaining legacy diesel-based power systems?

We’ve seen different towercos go in one of two different directions when it comes to investing in energy efficiency programmes. Some towercos invest ‘full blast’ in energy efficiency from early on and it takes them 12-24 months to upgrade the power systems on most of their sites. Other towercos take a more cautious approach; after they buy towers they install RMS to monitor sites for 12-18 months after which they decide where and how to invest in energy efficiency – the benefits are realised later, which might be a prudent albeit time consuming approach. Each towerco has its own strategy – there’s no right or wrong.

What matters most is Total Cost of Ownership (TCO). Having acquired a new portfolio of towers, a towerco may find themselves owning a number of inefficient diesel generators with several thousand hours of potential runtime before they need replacing. You can run those assets into the ground, or you capitalise on their immediate refurbishment and resale value and invest in a more efficient solution that delivers RoI in 12-18 months. It all depends on the way each towerco looks at TCO. It is also driven by the availability of capital to invest. Towercos are mostly generating capital to acquire new towers, they don’t always have the financing needed to invest in energy efficiency across the entire portfolio until they complete a new round of funding.

TowerXchange: Finally, please sum up how you would differentiate IPT PowerTech from other turnkey infrastructure providers for telecoms?

IPT PowerTech distinguishes itself by merging the worlds of power and telecom. We have our own manufacturing facilities in Lebanon and Romania, which means we are uniquely able to combine high quality in-house products coupled with our own services proposition.

Our outstanding management team, both in our headquarters and at country level who are leading the operations, reflects the fact that our people are as valuable as our products and services.

Our company slogan, “redefining power solutions, reinventing telecom infrastructure” is illustrated in three ways:

1. We always redefine and customise power solutions to maximise quality of power delivery and economise power costs in the light of the declining ARPU.

2. We have more than 20 years of experience. With proven R&D teams and 1,700 experts in the field we are the most specialised power solution provider in this industry, operating in areas where power has always been a challenge.

3. On the other hand we reinvent telecom infrastructure by being a one stop shop for any telco, towerco or vendor in terms of infrastructure services from site acquisition, to the building of sites, managed services and maintenance, telecom installation and integration.