Omnix is one of the newer towercos serving the Malaysian market. With a full-time staff of 25 and receiving its license from the Malaysian Communications and Multimedia Commission (MCMC) in 2012, it currently counts five operators as clients. It is a key partner not only for new market entrants such as U Mobile and webe (former WiMax provider), but also for veteran operators Celcom, Maxis, and DiGi. Omnix has a unique value proposition through its ability to acquire highly difficult but desirable sites. Read on to find out how this company plans to become one of the top three towercos in the country.
TowerXchange: Please introduce yourself, your role, and company.
David Higate, Managing Director, Omnix:
I am one of four directors/shareholders in the company. We also have a private Malaysian investment company who joined us in 2016. Omnix was established in 2011 as an independent towerco to meet the operator demand for mobile coverage in urban and suburban areas of peninsula Malaysia.
Omnix was awarded a government license in 2012 to develop and license space on towers in Malaysia. This license is called the NFP license (Network Facility Provider) and is mandatory for all operators and independent towercos.
In terms of my personal background, I was in the British military for 14 years and involved in worldwide tactical communications. Subsequently I joined AT&T and Alcatel-Lucent. I came to work in Malaysia in the 90s for one of the operators, through AT&T, but I’ve always been involved in communications in one form or other for over 25 years.
Our other director/shareholder Mark Foran who has a telecoms business in Ireland and myself established a contracting company in Kuala Lumpur in 2007. In 2011 we formed Omnix Sdn Bhd with Mohd Rohaizee, a Malaysian businessman who had been working in site acquisition for ten years, and Suresh Superamanium, a Malaysian engineer and businessman.
TowerXchange: Can you please tell us about your network portfolio.
David Higate, Managing Director, Omnix:
Our network now consists of 112 structures that are completed and that have operator equipment deployed. This number is increasing by three to six towers per month. These are predominantly greenfield sites and we only have a small number of rooftops. In all honesty, we do not really target rooftops. In Malaysia as in Europe, local authorities do not promote rooftops sites that disrupt the urban landscape.
All our structures are camouflaged and resemble minarets or sign boards. Our sites are minarets first, telecom towers second. All our steelwork and equipment is inside a fibreglass shroud or minaret. We are completely focused on these types of sites right now and have developed a number of designs.
In terms of location, we try to focus on areas of the country that are very hard to penetrate due to different local authorities and other permit hurdles. We have structures installed from Kedah which borders Thailand in the north, including Penang, all the way down to Johor which borders Singapore in the south.
The central area where we are in Kuala Lumpur is well covered, so now the operators are focusing on covering as much of the country as they can due to the conditions of their licenses. We’re now working mainly in five different Malaysian states, and other states outside of Kuala Lumpur.
The main reason we differ from our competitors is that the operators tend to come to us with sites that are very difficult to acquire, those high demand sites they or other NFP holders simply can’t acquire. When we started off we focused on building up a land bank before we started building the structures, which we achieved through government and private site ground tenancy agreements with the Islamic Council in Malaysia.
As soon as we had a portfolio of land ready to go, we approached mobile network operators. That’s why our tower construction numbers were small for the first 18 months, but after that period of intense acquisition, we moved forward at a very fast pace.
This is quite a unique selling point for us since our customers may have had towercos trying to acquire land for them in the past, but a single site process can take up to a year. In many cases we were able to acquire sites in under one month, which is a major achievement and got us a lot of traction with the operators!
TowerXchange: Can you tell us a little about the clients you currently work with and any details you are able to share on the arrangements?
David Higate, Managing Director, Omnix:
Malaysia has five main operators: Celcom, Maxis, DiGi, U Mobile, and webe, who is the newest addition and originally a WiMAX provider. We are currently working with all operators but U Mobile was our first customer.
We’re slowly building up our portfolio. U Mobile and webe are currently the most aggressive because they are relatively new. Maxis, Celcom, and DiGi have been building their networks for many years. That said, there are still a lot of infill sites required by LTE networks in the future.
Currently we have two master license agreements, and expecting a third very shortly. We have a 90-day SLA to complete sites, from acquisition to build completion, which we achieve in the majority of cases.
TowerXchange: What type of towers are you working with generally?
David Higate, Managing Director, Omnix:
Since we are building mainly urban sites, we concentrate on monopoles. Our structures may be covered in fibreglass or have a signage at high level, but they are all essentially monopoles.
Our structures are no more than 30m high, which is attractive to the operators in urban areas because most of our competitors use lower monopoles (15-20m). We also tend not to do lightweight structures as we want to ensure a minimum capacity for three operators.
TowerXchange: And what is the typical set up on your site?
David Higate, Managing Director, Omnix:
The footprint area is 5mx5m minimum, so quite compact. We can fit three operators as long they comply with the terms of the licence and only use the allocated space, which is only suitable for a standard outdoor cabinet.
Each site is fully fenced off and then each operator’s base transceiver station (BTS) will have a security cage installed. Security is extremely important to Omnix as many of our sites are on public land or school sites.
TowerXchange: Given that, what is the typical capex outlay required to build a greenfield GBT? And a rooftop?
David Higate, Managing Director, Omnix:
For greenfield sites, it’s between US$45,000 to US$55,000 per site. We don’t have many rooftops, but they are normally around US$15,000 to US$20,000 depending on access.
Those figures are likely higher than our competitors since the fibreglass and radio-friendly materials we utilise are expensive, but we have to ensure that our structures are unobtrusive and fit as much as possible into the streetscape.
TowerXchange: Can you tell us more about your ground rental agreements and opex arrangement?
David Higate, Managing Director, Omnix:
None of our structures is actually older than three years.
All of our individual rental agreements with the operators are either 7+8 years or 10+5 years. However, it is rare for an operator to vacate the site after the initial period.
We pay a ground rent, whether to a government body or the Islamic Council on a monthly basis. We also do a lot of corporate social responsibility (CSR) activities such as providing technology to schools whereby we offer free wireless connectivity plus a fixed monthly ground rent contribution to the school. This community engagement allows us to demonstrate the benefits of connectivity and mitigate resistance to a tower being located in their area.
In terms of the ground rental agreements, we have up to 15-year land rental agreements with the Islamic Council. However with the government land, you typically won’t get longer than a three to five year agreement.
Again, the structures are fairly new, with 25-year guarantees from our manufacturers and are constructed to the highest international standard which in turn means lower preventative maintenance costs going forward.
TowerXchange: How would you describe the macro environment in Malaysia for a towerco? What are some of the challenges vs opportunities?
David Higate, Managing Director, Omnix:
The two big operators in Malaysia are Celcom and Maxis, with over 8,000 cell sites each. All operators are investing to improve and achieve overall geographic footprint and penetration. This gives the independent towercos a chance to grow their portfolios outside the main urban areas. In addition to this coverage rollout, they are rolling out 4G which again creates additional demand for sites. From our perspective, the biggest challenge is securing sites in high demand areas.
TowerXchange: And what about from a regulatory perspective? You mentioned towercos need a license to operate.
David Higate, Managing Director, Omnix:
There are approximately 100 network facility provider (NFP) licenses issued, however, only 10% of the companies actually use them. As I mentioned previously, securing the sites is the major challenge.
MCMC (Malaysian Communications and Multimedia Commission) monitors all of the telecommunications operators and towercos in Malaysia. It took us nearly two years to be awarded an NFP license. The licence specifies how many structures you need to build in different geographic areas. MCMC has the power to withdraw the licence if site numbers are not achieved.
Each time Omnix wants to proceed with a tower, we have to go through MCMC to get an authorisation. They can occasionally visit the site to ensure compliance and perform a study on the radiation potential before you can proceed.
TowerXchange: What about coverage? Are there any initiatives are driving rural coverage in the country?
David Higate, Managing Director, Omnix:
The LTE coverage in Malaysia right now is about 50%.
The government via MCMC is now investing over 1bn ringgit (US$225mn) to get broadband into rural areas. So far, they’ve built over 1,000 towers in various rural areas of Malaysia with fibre optic transmission solutions, which allows operators to provide coverage to many remote villages in the country.
According to the MCMC website, as of 30 September 2016, they have 2,367 sites as part of the mobile broadband coverage expansion.
These initiatives are funded by mobile network operators and towercos who pay a percentage of profits to MCMC, which uses them to fund various coverage projects in less developed areas.
Mobile network operators are essentially subsidised to offer coverage in those areas which might not be very profitable, but are often imposed as part of their license’s terms.
TowerXchange: So is population coverage approaching 100% or are there more towers to be built to achieve full coverage?
David Higate, Managing Director, Omnix:
There are 29mn people in Malaysia but each operator has varying levels of geographic coverage.
The country has one of the highest rates of devices in the world at about 1.4 devices per person.
TowerXchange: What are the growth opportunities for Omnix and how might that be financed?
David Higate, Managing Director, Omnix:
At the moment we are developing a business plan up to 2020 which involves the development of a further 650 sites. Most of these sites will be on government owned property. We are confident of operator demand over the next four years particularly in the state of Johor in southern Malaysia.
This means our focus is and will be on Malaysia and there are no plans to expand the business outside the country.
To date we have secured funding from shareholders, commercial banks, and private investors. We will be seeking a strategic partnership moving forward to help us achieve our 2017-2020 targets. The expected capex over the next four years is estimated at 120-140mn ringgit (US$27-31mn) so funding is a vital component of our strategic plan
In general Malaysia welcomes foreign investment so we would not be restricted in terms of where we can secure funding.
TowerXchange: Are you engaging with the microcell, DAS, IBS, and small cell markets?
David Higate, Managing Director, Omnix:
No, not at this stage. We’ve been approached for small cell projects but there are a lot of players in this market in Malaysia and rental rates are comparatively low.
TowerXchange: Is energy equipment typically bought under traditional capex models, or are opex models being explored?
David Higate, Managing Director, Omnix:
No, not at this stage. As mains power is available to all sites, alternative energy options are not being offered or explored. In some cases we provide the power to multiple operators on a site and charge accordingly as a VO (variation order).
We also provide fibre optic cable access to all the sites and it’s up to the operators if they want to use this service as a transmission solution. Typically we are paid an additional fixed monthly fee known as ROW (right-of-way) for this.
TowerXchange: Are remote monitoring and access control systems typically deployed on your sites?
David Higate, Managing Director, Omnix:
The majority of our sites are within third-party secured areas such as mosques or schools. Many of these sites have 24-hour manned security. As part of our 2017-2020 strategy we will roll out an automated lock system to control operator access to Omnix sites.
TowerXchange: To sum up, what would you describe as Omnix’s unique selling proposition?
David Higate, Managing Director, Omnix:
I think the work we do on the ground in terms of securing sites will pay dividends in increasing our site numbers over the next four years. We already have an extensive land bank which we are working our way through with all five operators. By the end of this year we hope to have a minimum of 220 tower with tenancy ratio of 1.5.
Malaysian government tower network part of initiative for digital economy
Universal Service Provision (USP) is an initiative by the Malaysian Communications and Multimedia Commission to achieve the following objectives:
1. Provide collective and individual access to communications in underserved areas and to underserved groups
2. Encourage the use of ICT to build a knowledge-based society
3. Contribute towards the socio-economic development of local communities
4. Bridge the digital divide
To realise these goals, several initiatives have been implemented in various stages since 2002, and to-date we are currently initiated 10 initiatives nationwide.
These are:
- 1Malaysia Internet Centre (P|1M)
- Community WiFi (WK)
- Cellular Coverage Expansion – Time 3 & Time 3 Extension
- Mobile Broadband Coverage – 3G & LTE
- Rural Broadband (RBB)
- Suburban Broadband (SUBB)
- Fiber Optic Network Expansion
- 1Malaysia People’s Cable System (SKR1M)
- Smart Device with Internet Package
- Telephony
Source: www.skmm.gov.my
