Releasing the value in Nigeria’s 3,000+ hidden towers

Nigeria needs to roughly double its tower count to expand coverage and densify networks to meet data demand in urban areas. Any tower strategy that can reduce the capex required for this multi-billion dollar programme will do a lot to accelerate network build out and improve quality of service. Secured Towers are aiming to manage and upgrade the over 3,000 of such towers already in place in Nigeria which are privately owned without a mobile operator tenant. TowerXchange speaks with Collins Onumajuru, CEO at Secured Towers about how he is progressing in filling Nigeria’s tower deficit.

If you would like to know more, Collins Onumajuru will be taking part in TowerXchange Meetup Africa, in Johannesburg, on October 8-9th, click here to register or email Anna Mayhew at amayhew@towerxchange.com for more details.

TowerXchange: First please introduce yourself – how did you get into the tower business?

I am a lawyer by profession and training, and received a Master of Law from the University of Lagos in 2000. I practiced as a lawyer from the mid-90s to the mid-00s, when in 2005, I joined Helios Towers Nigeria as a pioneer staff, setting up the Legal, Regulatory and Commercial departments.

Prior to joining Helios Towers Nigeria I had experience in telecoms. My firm acted as external solicitors to a number of telecom operators and we were involved in drawing up the road map for site acquisition and regulatory regime right from inception in 2001. I have been in the telecoms industry for nearly 20 years with a strong background in Legal, Regulatory and Commercial matters, the experiences gathered over this period are being deployed in the running of Secured Towers.

TowerXchange: Tell us more about how Secured Towers differentiates itself from other middle-market towercos in Nigeria. What makes your sites special?

Secured Towers Limited currently has an inventory of about 600 towers which have been secured from different sources but are currently undergoing various stages of retrofitting in order to make it fit for purpose. These are not greenfield towers and few of them are rooftops.  

We target private towers owned by non-mobile operators. We take out a long-term lease on the tower, take the tower management off the owner’s balance sheet, upgrade the tower and look to monetise it through leasing to mobile and other operators. 

Most institutions require their own secure communications network in Nigeria, but have traditionally had to provide the tower, maintenance, radio and power themselves. This is a big cost for them, but they were unaware of the opportunities to monetise these towers until approached by Secured Towers. 

We are opening the eyes of these institutions and corporations to what they can do with their assets. The revenue model varies from one owner to another and from site to another depending on various circumstances. At some sites we manage the tower and lease it out to new tenants ourselves. At other sites there is a net revenue sharing model.  Likewise, at some sites we can depend on the owner of the site to provide power to the site, but at others we need to provide our own power, and that affects the revenue model. 

There are over 3,000 of such towers in Nigeria, and are usually in prime, commercial, dense, urban environments which are right for network infill. The towers are not core assets for them, so the time is right for a company like Secured Towers to monetise those towers.

TowerXchange: Can you tell us some more details, what assets do you have on the ground? What is the pedigree of your management team? Where in Nigeria are your towers?

Right now, we have an inventory of over 600 towers, but many of these still have their anchor tenants on them. Currently, we have order for a reasonable percentage of the towers from various operators. A priority is to push up our tenancy ratio and find opportunities for these towers to provide infill for Nigeria’s mobile networks. 

Our sites are spread all across Nigeria, but they are all in Tier One cities like Lagos, Abuja, Kano, Port Harcourt and Ibadan.  Because the majority of our lessor institutions are located in areas of high commercial activity, this assists our site selection because that is where we want to own towers too and where MNOs require infill.

We have a careful, lean management structure and at the moment very few people work directly for Secured Towers, including myself. Most of the jobs are done on contracts and we hire as needs arise. A majority of the employees and contractors are Nigerians with vast experience in telecom operations.

Because these sites were not originally built as telecom base stations, in order to lease up our towers we need to reassure our potential tenants that these towers will reliably meet their needs. That means we audit the towers, check they have the necessary permits and perform any upgrades necessary.  

TowerXchange: If you’re not building greenfield macro towers, your outlays must be different to other towercos, what is your typical capex outlay required to upgrade an acquisition?

I cannot share specific figures, but even if I could, there’s no typical tower. The quality and existing infrastructure varies from site to site. First of all we conduct a structural integrity test to see whether the existing tower can accommodate additional antennae, thereafter we do a proper audit of the tower.

Then we will look at regulatory documentation to see what permits are needed, do extra civil work if need be, and whether additional approvals are required for us to add more tenants to the tower. We may need to reinforce the tower, or extend it to make it taller. We will also need to install additional brackets and so on to physically accommodate additional tenants.  All these are site specific.

So our capex varies from site to site, but our costs are still much lower than building a greenfield tower, and our time to market is shorter. We are open to building greenfield towers in the future, but for the time being we are happy focusing on our current model. 

TowerXchange: What are your typical opex costs and how do you manage energy on sites as diverse as yours?

Our operational costs are similar to other towercos in Nigeria. The provision of power remains a major opex cost notwithstanding the source. One area of difference for our operations is that we can draw power from the owners who are the anchor tenants on our sites. 

Even though our sites are in central locations, less than 30% are on grid because of poor availability. So they have to provide their own power. However, most of these owners only generate power while they are open, which means we have to provide backup power for evenings, weekends and public holidays. Some sites have a hybrid solar back-up and we are working with other companies who are providing us with an alternative local grids powered by solar. About 50% of our sites will be running on battery back-up on evenings and weekends. 

We are also discussing with Cooltech Power, a Nigerian company with links to China, who offer power-as-a-service which will allow us to put aside our power problems and concentrate on managing the real estate and relationships with our tenants.

But because we are using towers which originate outside of telecoms and are not built in a uniform manner, there is no single energy set-up or single solution. We have to be flexible. 

TowerXchange: What are the growth opportunities for Secured Towers in Nigeria over the next two or three years? Any other comments on the future of the company?

The demand for additional sites in Nigeria is huge. We are told that Nigeria needs about 60,000 towers or more and it currently has less than 50% of this number. So there is huge potential in the tower industry. Secured Towers can play a significant role in supporting network infill and reducing the capex required to build out these additional towers. 

There are over 3,000 non-conventional towers and many more undiscovered. Some of these are monopoles, but most are not; although some aren’t viable there is a big runway for us to upgrade and lease up these non-conventional sites. By upgrading these towers and providing a good service to our tenants, we can find a lot of growth over the next two to three years without having to build greenfield sites. 

Demand for sites should be robust in Nigeria, so populating and increasing our tenancy ratio are the priority for Secured Towers. The towerco co-location model is a great model, but you cannot guarantee making an income with a single tenant, so we are aiming to find two or three for each of our selected towers and to be careful in further site selection. In the next two or three years we intend to reach a tenancy ratio of 1.5x. And we expect on some sites to exceed 2x. 

With time we will be looking for additional equity but less debt, however, we don’t want to rush into that. We have enough inventory to work with. Our growth ambitions will depend on what the market demands and the probability of having multiple tenants at any particular location. We will take things one step at a time and do the needful as required.

If you would like to know more, Collins Onumajuru will be taking part in TowerXchange Meetup Africa, in Johannesburg, on October 8-9th, click here to register or email Anna Mayhew at amayhew@towerxchange.com for more details.