Miteno: A market leader in the Chinese tower industry

With the formation of the record-breaking China Tower Company fast approaching, international investors are watching closely to identify new opportunities for investment. As huge as China Tower Company may be, there are still independent tower portfolios in China, comprising an estimated 15-20,000 towers. We spoke with Zhiyong Zhang, Chairman and President of one of the leading independent towercos Miteno to learn about the independent tower market in China and its ecosystem.

TowerXchange: Could you introduce your company and give us an idea of your position in the tower ecosystem?

Miteno was founded in 2004 and formally came into operation in 2006 as a designer and manufacturer of communication towers. We gradually branched out into the operation and maintenance of communication infrastructure. Before the establishment of China Tower Co., Ltd., Miteno was a leading vendor for China Mobile’s national central purchasing, the country’s largest telecom carrier. It can be said that Miteno is a market leader in China in the design and manufacture field of communication towers.

TowerXchange: Could you give us some insight into your business model evolution?

Miteno was listed on the domestic GEM as an ‘A Stock’ only four years after we came into operation, a testament to the company’s advanced business model. Though in theory Miteno is in a traditional manufacturing industry, we designed an innovative model for communication tower provisioning, which integrates all resources of this traditional manufacturing industry on one operational platform. Under this model, we highlight our brand value by enhancing our technological edge to focus on design. Under strict management, we outsourced most of our manufacturing, which would otherwise require heavy asset management.

Our business focus has gradually shifted to communication tower operation, i.e. leasing communication infrastructure to telecom carriers. Miteno owns a network monitoring platform for tower operation, which not only tracks the status of the tower in real-time, but also gathers other data through extra interfaces, such as video monitoring and environment monitoring. When our towers reach a certain number, this platform will yield a huge network value.

TowerXchange: Can you provide some specific detail on the scale and structure of the ecosystem of privately owned towers in China and how that segment of the market will be affected by the creation of China Tower Company?

Currently the number of privately-owned towers in China is around 20,000. Half of them belong to big players like Miteno, the rest of them are scattered and operated by hundreds of private companies throughout China.  These independent companies will benefit from the creation of China Tower, because leasing towers from a third party is feasible for wireless carriers. For Miteno, we are participating as a tower consolidator, trying to lease self-owned towers to more tenants. Our strengths lie in tower design, manufacture and installation.

TowerXchange: The tower industry varies considerably from country to country; can you give us an idea of how tower sharing and tower leasing work in the Chinese market?

A few years ago, the vast majority of communication towers in China were constructed by state-owned telecom carriers. These assets were later divested to the newly founded China Tower Company, allowing the carriers to co-construct and share the communication infrastructure through administrative means. Private owners across the county also have a small number of communication assets, offering equipment lease services to telecom carriers.

TowerXchange: What is the cost of building new towers compared to the cost of leasing towers in the Chinese market?

The situation varies in different areas, and relevant statistics are not forthcoming as lease services have just begun.

TowerXchange: What is the extent, quality and availability of the electricity grid in the Chinese market? Can you give an idea of what percentage of towers are off-grid? Who owns the power equipment when a site has multiple tenants?

It can be said that 99.9% of the communication towers in China rely on fiber-optic communication and on State Grid Corporation of China for power supply. Power supply is never a problem.

TowerXchange: The GSMA has stated that there are 35,000 instances of hybrid and renewable power being used in China. Are these solutions used for off grid towers? Do Miteno’s towers use hybrid and renewable energy solutions?

Hybrid and renewable energy are used in China only as backup power supply. Government owned mobile carriers have strict design requirements on towers; very few off grid towers exist. We are introducing new backup power solutions with better cost performance.

TowerXchange: The transfer of over one million towers to China Tower Company is unprecedented in the global market. What impact do you think this will have on the Chinese tower market?

There are three major positive impacts. First, it changes the KPI assessment mechanism of telecom carriers so that they can fully focus on their core business. Second, it shifts infrastructure investment from capital expenditure to operating expenditure in recognition of the third party leasing model. Third, such recognition provides broad space for the development of private capital, thus creating a completely new industry chain in China.

TowerXchange: What is Miteno’s long-term strategy, both in the domestic market and internationally? Do you have plans for international growth?

As a listed company committed to meeting the needs of capital market, we have made “going global” one of our strategies. Miteno’s strengths lie in the tower design, manufacture, installation, operation and maintenance of the communication tower, as well as in financing capacity. We will also receive the support of national policies in exploring the international market.