Who’s who in the global tower market

Welcome to the TowerXchange who’s who of global towercos. In this new series of four reference articles, we will profile the 139 tower companies known to TowerXchange with a tower count in excess of 300. We’ll introduce each tower company and seek to differentiate them in terms of footprint, business model and ownership profile. Part one of this series covers the world’s 12 largest towercos, who between them own 55% of the world’s 4.55mn investible towers and rooftops. Note that the data in this article was compiled in March 2019.

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Disciplined globalisation

Tower count: 170,996

One of the ‘founder’ U.S. towercos that originated the independent tower company business model more than two decades ago, American Tower (AMT) dates back to 1995. Originally a consolidator of radio assets, the founders of what was to become American Tower were quickly attracted to the recurring revenues generated by wireless companies leasing space on radio masts.

American Tower was spun off from then parent company American Radio in 1998, with the newly telecom infrastructure focused entity listing on the NYSE as AMT at a price of US$17.38 – today (March 2019) AMT stock is valued at over US$190, with a market cap of US$85.5bn, up over 33% in the last six months. AMT became a member of the Fortune 500 in 2017.

When last disclosed in their 2018 annual report, AMT had 5,026 employees.

While constantly vying with Crown Castle for the title of U.S. domestic market leader, American Tower has the most diverse geographical footprint of all the world’s towercos, with a presence in 16 countries. International markets now generate ~45% of AMT’s site revenues. AMT’s international expansion is driven by a disciplined investment thesis: while AMT has a lower cost of capital than many competitive bidders, the company will not overpay for towers, and seeks out assets in countries where rule of law can be relied upon.

Over the last decade, AMT has deployed almost US$11bn to acquire almost 110,000 towers outside the United States. AMT has been equally active in M&A in their domestic market, headlined by their US$3.1bn merger with SpectraSite, back in 2005, their acquisition of Global Tower Partners and their 15,400 towers for US$4.8bn in 2013, and the acquisition of 11,448 sites from Verizon for US$5bn in 2015.

AMT has called upon similar levels of discipline when it comes to diversification of its asset portfolio. Chairman and CEO Jim Taiclet has granted flexibility for AMT to diversify beyond macro towers, providing they stick reasonably close to their core business of co-locatable wireless infrastructure, spurring AMT to explore fibre partnerships and acquisitions in South Africa, Mexico and Argentina. A long-time leader indoor DAS, AMT is exploring opportunities in urban infrastructure, including provision of small cells, smart poles, IoT services and V2I. AMT are believed to be dabbling in edge data centres, but there are no projects yet in the public domain.

AMT is a pureplay independent towerco, although it does not own 100% equity in all its regional subsidiaries. AMT has 51% controlling stakes in three joint ventures: with MTN in ATC Ghana and Uganda, and in Europe with partner PGGM, a Dutch pension fund. AMT is registered as a Real Estate Investment Trust, securing significant tax advantages and committing to regular dividend distributions. AMT operates a ‘steel and grass’ business model – meaning it provides only ‘vertical real estate’ not power – in all markets except India, Nigeria, Ghana, Uganda and Kenya, where AMT provides power-as-a-service. There are also a few pockets of managed power service provision in the U.S and Brazil.

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Benchmark operator-led towerco

Tower count: 40,192 (92,301 if consolidated to include Bharti Infratel’s 42% share of Indus Towers)

Like many operator-led towercos, Bharti Infratel originated within its parent MNO’s organisational structure – as the tower management function within Bharti Airtel. Bharti Infratel was carved out as an independent tower company in July 2007, with sister company Indus Towers, in which Infratel owns a 42% stake, created in November of that same year.

In December 2012, Bharti Infratel debuted on India’s National Stock Exchange, Mumbai at a price of Rs 210, a market cap of around US$7.5bn, and today (March 2019) trades at Rs 316, a market cap of US$8.76bn.

Today Bharti Infratel owns 40,192 towers across 11 telecom circles and 18 states, namely Jammu & Kashmir, Himachal Pradesh, Haryana, Uttar Pradesh, Uttarakhand, Rajasthan, Madhya Pradesh, Chattisgarh, Bihar, Jharkhand, Orissa, Assam, Meghalaya, Tripura, Arunachal Pradesh, Manipur, Mizoram and Nagaland. Bharti Infratel’s tenancy on their own sits is currently 1.93x, down from 2.38x a year ago, reflecting churn related to MNO consolidation.

Bharti Infratel is registered with the Department of Telecommunications as an IP1 Infrastructure Provider, the conditions of which now enable the deployment of active infrastructure including small cells. Responding both to this opportunity, and the challenges represented by MNO consolidation, Bharti Infratel has diversified into smart city services, IBS, small cells, BTS hotels, DAS and fiberization, and has already deployed over 150 smart pol es and a similar number of smart billboards, with smart city initiatives under way such as their project in Bhopal.

Bharti Infratel currently operates with an EBITDA margin of 44.4% on consolidated revenues of Rs 144,896 (US$2.075bn). Excluding its stake in Indus Towers, Bharti Infratel employs 1,227 staff.

Bharti Infratel provides power-as-a-service, and has reduced diesel consumption by 31% in the last three years thanks to installing over 14,000 green sites and 2,500 solar sites under its ZEN (Zero Emissions Network) and award-winning Green Towers P7 programme. Energy represents 66.67% of Bharti Infratel’s opex.

Bharti Infratel is currently merging with Indus Towers – see the sidebar “The merger of Bharti Infratel and Indus Towers.”

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European market makers

Tower count: 23,440

Europe’s leading telecommunications infrastructure solution provider, Cellnex now owns 23,440 towers, and 1,592 DAS nodes, with a total of 33,860 points of presence, across six European countries: Italy, Netherlands, United Kingdom, France, Switzerland and Spain. Cellnex’s average tenancy ratio is 1.55x.

Cellnex, then Abertis Telecom, traces its origins back to the turn of the millennium, starting out as a Digital Terrestrial Television (DTT) pioneer and Emergency Response network provider. The company made its first forays into the creation of Smart Cities as long ago as 2011, and made its first purchases of telecom towers in 2012-13 from Telefónica and Yoigo. Following Cellnex’s successful IPO, their acquisition of 7,377 towers from VEON’s WIND in Italy cemented Cellnex’s leadership position and vision to create Europe’s first pan-European towerco, a vision that was fulfilled with subsequent acquisitions in The Netherlands, France, the UK and Switzerland. In May 2019 Cellnex announced a deal to acquire 10,700 towers from Iliad and Salt for €2.7bn. When complete, the acquisition, and an associated contract to build ~4,000 more towers, will double Cellnex’s revenues and EBITDA.

Cellnex has a deep commitment to providing a broad digital service proposition, evolving to meet changing requirements as Europe enters the 5G, smart city era. Cellnex operates Spain’s first and largest IoT network, and partners with SigFox in Switzerland. Cellnex acquired Italian small cell pioneer CommsCon back in 2016, and the following year announced a partnership with JCDecaux to leverage billboards and bus stops. Cellnex subsidiary Tradia acquired fibreco XOC in 2018. Cellnex exhibited its “Adaptive Edge” partnerships and vision at MWC19.

Broadcasting infrastructure continues to contribute 25.9% of Cellnex’s revenues, with telecom infrastructure up to 65% and ‘Other network services’ contributing 9.1%.

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Co-build, co-share

Tower count: 1,948,000

With around almost two million towers (1.948mn at Q418), China Tower Corporation (CTC) has almost 50% more towers than the rest of the global tower industry combined. Established on July 18, 2014, CTC’s portfolio was expanded in October 2015 by the carve out and transfer of 1.4mn towers formerly owned by China Mobile, China Telecom and China Unicom. CTC has built over half a million towers and added over 1.2mn tenancies in less than five years.

The emergence of CTC was driven by MIIT’s “co-build, co-share” philosophy, designed to increase the efficiency of land use, capital deployment in telecoms, and to accelerate China’s rollout of 5G. CTC is already piloting 5G on over 1,000 sites across 23 cities.

MNOs are no longer permitted to build their own towers in China, and 73% of the new towers built by CTC are shared.

Just under 70% of the equity in CTC is retained by China’s three MNOs, which is reflected in its lease rates and co-location discounting structure, which are among the most generous in the world.

CTC raised US$7.5bn in its landmark IPO on the Hong Kong main board, representing the world’s largest IPO since 2016. Since IPO, CTC’s market cap is up by more than 50% (through March 2019).

CTC employs ~18,000 people.

CTC owns and operates 97.5% of China’s macro towers, and also has a small but growing stake in the 2mn+ Chinese small cell market. CTC had over 20,000 small cell, and a similar number of DAS sites, at the end of 2018. Small cell and DAS currently represents 3% of CTC revenues. CTC’s ‘Trans-sector site application and information’ business (which leverages sites to provide CCTV, outdoor advertising, satellite signal augmentation, earthquake, environmental and meteorological monitoring) currently represents 1.7% of revenues, but has grown more than 6x in the last year.

CTC leverages partnerships with provincial and city governments to provide access to over 7.5mn lamp poles, 1mn surveillance poles and 250,000 buildings, while partnerships with State-owned electricity grid companies provide access to 3.5mn utility towers. CTC is also working with the China Railway Corporation to enhance mobile broadband service provision along over 18,000km of high-speed rail network.

CTC has suggested international expansion is a medium rather than short-term goal, although they have already made forays into Laos, with co-operation agreements governing infrastructure sharing and smart cities.

CTC provides power as a service, and has invested in operational efficiency measures such as online procurement and centralised remote monitoring to reduce the cost of maintenance from 10.3% of operating revenue in 2015-16 to 8.8% by 2017-18. CTC is also an energy innovator, and has leveraged recycled lithium-ion batteries from electric vehicles at over 70,000 cell sites to reduce reliance on peak rate grid power.

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Pioneers of fibre and small cell diversification

Tower count: 40,039

Founded in Houston in 1994, Crown Castle is another member of the US$150bn-valued triumvirate of ‘original’ U.S. public towercos (along with American Tower and SBA).

Crown Castle is increasingly differentiated by the diversity of its asset portfolio: the company has spent US$13bn acquiring 65,000 route miles of fibre, which has in turn enabled their rapid expansion into small cells – the company has 65,000 small cell nodes deployed or in the pipeline. 34% of Crown Castle’s site rental revenues now come from small cell, fibre and DAS, with the balance derived from their U.S. towers business.

Crown Castle’s fibre acquisitions include Wilcon, Lightower, Fibernet Direct, Sunesys, and NextG Networks.

With 4,500 employees, Crown Castle has trebled in size since 2013.

Crown Castle has 40,039 towers, assembled through a combination of organic and inorganic growth, highlighted by acquisitions from AT&T (paying US$4.85bn for 9,708 towers in 2013), T-Mobile (paying US$2.4bn for 7,200 towers in 2012) and Global Signal, another independent towerco, in 2007. Crown Castle has a tenancy ratio of 2.2.

Crown Castle had a successful foray into European towers through the turn of the millennium, acquiring a £75mn revenue transmission tower business from the BBC in 1997, driving tenancy ratios to 2.9 and revenues to £233mn, and selling the business to the UK’s National Grid for £1.1bn in 2004. Those assets are now part of Arqiva. While Crown Castle was the first U.S. towerco to open an office in Brazil, they have never established a footprint in Latin America, and the sale of Crown Castle Australia (in 2015 for US$1.6bn) represented Crown Castle’s exit from international markets.

Crown Castle first listed on the NASDAQ in 1998, moving to the NYSE in 2001. Crown Castle became a Real Estate Investment trust in 2014, securing tax benefits in return for commitments to pay significant dividends to shareholders. Crown Castle’s market cap passed the US$50bn threshold in 2019.

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Deutsche Telekom’s silent giant towerco awakens

Tower count: 29,000

With 29,000 towers and rooftops, Deutsche Funkturm is Europe’s largest towerco.

Deutsche Funkturm, often abbreviated to DFMG, was carved out of Deutsche Telekom in 2002. The original intent of the carve-out was as a precursor to the sale of DFMG but, despite announcements of intent to sell the company in 2007, and intent to sell a 49% stake in 2016, Deustche Telekom still holds 83.33% of the share capital in DFMG, with the balance held by another Deutsche Telekom subsidiary.

DFMG’s parent MNO Deutsche Telekom remains the towerco’s anchor tenant, representing around a third of DFMG’s tenancies. Approximately 8,500 of DFMG’s German sites are ground based telecom towers, and a further 500 are television towers. Those 9,000 ground based towers have a tenancy ratio around 2.3. Reflecting the rooftop-centric network design in Germany, two thirds of DFMG’s sites are rooftops, with a much lower tenancy ratio of 1.1-1.5. EMF regulation is one hindrance limiting the co-location of rooftops in Germany, but a more significant factor are the demands of landlords for incremental rental payments.

DFMG also owns Omega Towers, a portfolio derived from the transfer of 7,700 overlapping rooftop sites when Deutsche Telekom acquired E+ from Telefonica. That rooftop portfolio is being steadily decommissioned toward a target of 5,000 sites by 2020.

DFMG are embarking on a policy of rapid growth in Germany, aiming to double the number of ground based towers in their portfolio by 2022. DFMG added 1,300 sites in 2018, and aims to add 1,800 in 2019.

While DFMG offers the majority of their sites for co-location by competitors of parent company Deutsche Telekom, historically DFMG have not sold co-location as proactively as, for example, their competitors American Tower Germany. DFMG also reserves a small number of ‘blacklisted’ critical sites on which Deutsche Telekom’s competitors are not allowed to co-locate.

In early 2017, Deutsche Telekom restructured DFMG from a 100% owned subsidiary to a ‘sister company’, in readiness to deploy much of the capex on passive infrastructure for 5G through the towerco, thus lightening the burden on the MNO’s balance sheet.

DFMG generated revenues of €862mn (US$962mn) in FY18, virtually unchanged since 2017 (€864mn or US$965mn), with an adjusted EBITDA of €529mn (US$590mn), up from €510mn (US$569mn), in 2017, giving DFMG an EBITDA margin of 61% (up from 59% in 2017). DFMG has a staff of 800.

DFMG has recently extended the scope of its operations to include the T-Mobile towers in the Netherlands ahead of the merger with Tele2. DFMG are working on a similar strategy in Austria. There is scope for DFMG to expand further across the Deutsche Telecom footprint, which includes majority stakes in MNO opcos in a dozen countries, with minority stakes in two more. Given that Deutsche Telekom owns ~25,000 towers and points of presence outside Germany, and given that the company is gearing up for significant network infrastructure investment for 5G, it is conceivable that DFMG could have 50-70,000 towers and rooftops by 2022.

Since 2017, DFMG has added a number of DAS and small cells to their portfolio, while they have also been pioneers of Electric Vehicle charging, and have identified 12,000 potential locations for EV charging.

DFMG provides power to their tenants on around 3,000 sites, through another Deutsche Telekom subsidiary PASM a partner of DFMG.

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Digital infrastructure service innovator

Tower count: 29,837

Renowned as the first and most innovative integrated communications infrastructure services company in Asia, edotco’s proposition spans traditional tower acquisition, build and co-location, operations and maintenance, small cell, in-building and smart city services and BTS hotels.

What really sets apart edotco from any other towerco in the world is its genuine ‘best of both worlds’ philosophy. Like its peers among other operator-led towercos, edotco is deeply committed to creating and sharing value with its MNO partners, driving edotco to expand their service proposition to meet changing needs. But the culture of edotco is as commercially-savvy and innovation-hungry as any independent towerco.

edotco was carved out of MNO Axiata in 2013. Despite Axiata retaining majority ownership, the MNO has only two of ten seats on edotco’s board, to ensure independent governance. Axiata sold a total of 37.6% equity in edotco between 2016-17 at a price which would have then valued the company at US$1.862bn. There has been growing speculation that edotco will list on the Kuala Lumpur stock exchange, seeking a ~US$2.5bn valuation.

Headquartered in Kuala Lumpur, edotco has a greater appetite for country risk than some of their peers in Asia, enabling them to expand across a footprint that includes 29,837 towers in Malaysia, Bangladesh, Cambodia, Myanmar, Pakistan and Sri Lanka. edotco has acquired an 80% stake in Mekong Tower Company with a view to entering Laos, and has signed an MOU with DICT indicating interest in securing a towerco license in the Philippines.

While the majority of edotco’s portfolio was carved out of local Axiata opcos, or built new, the company has some M&A history having acquired Digicel Myanmar Tower Company in 2015 (1,250 towers for US$221mn), and Tanzanite Tower in Pakistan (700 towers for US$88.9mn). A subsequent deal to acquire ~13,000 towers in Pakistan for just under US$1bn from VEON subsidiary Jazz fell through when regulatory approval was not received. Most recently, edotco acquired 325 towers in Cambodia from East Asia Telecom, and also acquired State-backed towerco Yiked Bina in Malaysia.

edotco provides power-as-a-service across much of their footprint, including for both their own 1,900 sites and a further 1,250 sites owned by Ooredoo in Myanmar, and is renowned for their ‘echo’ real-time monitoring service.

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Indian turnaround play

Tower count: 27,707

Founded in 2004, GTL Infrastructure listed on the National Stock Exchange of India in 2006, debuting at a share price of Rs 39.95, with a market cap of US$3.1bn. In the heyday of the Indian MNO gold rush in 2008, GTL’s stock was trading at just under Rs 100. The company had raised US$1.8bn to rollout a portfolio of 23,700 towers, which they supplemented with the acquisition of 17,500 Aircel towers, with 21,000 tenants, for a further US$1.8bn. At the time, GTL was the largest independent tower company in the world.

However, much of the value in the Aircel deal was derived from future cash flows derived from a planned further 20,000 tenancies. The 2012 MNO market restructuring, which included the cancellation of 122 licenses, meant Aircel was unable to honour its commitments. The timing was disastrous for GTL, which had placed orders and paid advances for towers and other equipment, and had to short close their commitment to vendors. The company ran up substantial debts, and the net worth of GTL was fully eroded: you can buy a share today (March 2019) for a less than a rupee, and GTL Infrastructure’s market cap is currently under US$200mn.

While GTL has worked tirelessly to restructure its debt and turnaround its fortunes, in FY17-18 achieving all time highs of 51,587 tenancies, a tenancy ratio of 1.86x, and revenues of US$362mn, the company faces a new, perhaps even greater challenge in 2018-19. GTL Infrastructure has been cruelly hit by the effects of MNO consolidation in India, leading to unprecedented tenancy churn, with total tenancies down 46.4% by the end of 2018, and EBITDA forecast to plunge by more than 60% through FY18-19. GTL Infrastructure has been particularly exposed to the bankruptcy of Aircel and further affected by the exits of SSTL and RCOM, and the mergers of Tata Teleservices with Bharti Airtel, and Vodafone with Idea. GTL Infrastructure has 27,707 towers on its balance sheet, but by March 2018 only 14,490 of those towers were occupied.

We can only hope GTL Infrastructure will continue to demonstrate the determination to fight back against these unprecedented challenges.

As at March 31 2018, GTL Infrastructure had 432 staff on its payroll, plus 550 outsourced. 

GTL Infrastructure provides power-as-a-service. The company has undertaken several cost reduction initiatives including installing free cooling units and charge-discharge batteries, reducing power, fuel and maintenance costs by 12% since FY15-16. Uptime has been sustained at 99.9%.

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Leading African tower aggregator goes global

Tower count: 23,276

Having established a footprint and reputation as the world’s premier emerging market towerco, aggregating over 23,000 sites in Sub-Saharan Africa, IHS has set its sights on globalisation, with pioneering sale and leaseback deals agreed in Saudi Arabia, Kuwait and an MOU signed in The Philippines.

IHS are renowned for unique engineering excellence, which can be traced back to 2001, and their origins as a trusted tower builder and managed services provider in Nigeria. That design, construction, operations and maintenance ability has enabled IHS to achieve uptime and efficiency levels that are frankly jaw-dropping, especially considering that they operate over 15,000 towers in the Nigerian market, where grid power is unreliable and where fuel theft had been rife. As such, IHS has become a pioneer and centre of excellence for energy efficiency and cell site monitoring and management. To date, IHS provides full power as a service across its footprint.

IHS’s appetite for innovation does stop at energy and operational efficiency. The towerco has IBS and DAS sites, and is licensed to deploy fibre in Nigeria, which could set them up to supplement tower cash flow with revenue from fibre and small cell solution provision as the countries it serves move from 4G rollout eventually to heterogeneous 5G networks.

IHS has been equally formidable in M&A, often going toe to toe with American Tower and emerging successful. IHS has deployed over US$2.3bn to acquire 17,779 sites in Nigeria, Cameroon, Cote d’Ivoire, Rwanda and Zambia, with a further US$813mn allocated to acquire almost 10,000 sites in the Middle East. IHS has announced, but not yet closed, the first tower sale and leaseback deals in MENA: to acquire 8,100 towers from Zain in Saudi Arabia and 1,700 from the same MNO in Kuwait. IHS has an appetite to expand into Asia, and has signed an MOU with the Department of Information and Communications Technology in the Philippines, where international towercos are sought to promote infrastructure sharing efficiencies and facilitate the entrance of a third MNO.

IHS’s geographic and business model diversification will reposition the business from its current status as African tower market leader to a become a global aggregator of communications infrastructure assets, which may ease its path to IPO. IHS’s current investors include French family fund Wendel, the IFC, AIIM, ECP, FMO, Investec, Goldman Sachs and sovereign wealth funds GIC (Singapore) and KIC (Korea).

In its 2018 annual report, investor Wendel reported that IHS had approximately 2,000 employees. The same source suggested that 2018 sales totalled US$1.168bn, up 5.5% YOY, with EBIT of US$248.3mn, representing an EBIT margin of 21.3%. Note that IHS and its investors do not disclose the EBITDA nor EBITDA margin, for the full group. However, do have a partial snapshot of the portfolio from via the bond market and 2018 full year results issued by IHS Netherlands Holdco B.V., a subsidiary which controls 6,524 of IHS’s Nigerian towers. IHS Netherlands Holdco B.V. reported an EBITDA margin of 61.7% on annual revenues totalling US$392.5mn (EBITDA of US$242.1mn). Reverting to metrics across the whole group derived from Wendel’s annual report, IHS’s net debt at 31 December 2018 was US$1,264.3mn. IHS’s point of presence tenancy ratio is 1.52x, with a technology tenancy ratio of 2.29x.

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The joint venture super-giant

Tower count: 124,069

Indus Towers is a unique infrastructure sharing joint venture – a meeting of minds of Bharti Airtel, Vodafone and Idea Cellular – and proof positive that infrastructure sharing can accelerate mobile adoption and ultimately digital transformation.

Indus Towers was conceived in 2006 as one of the most important products of “Project MOST” (Multi Operator Shared Towers), a cooperation between industrial stakeholders and the Ministry of Urban Affairs and Ministry of Communications, and the Government of India. Indus had a major impact from 2007-08, and had 70,000 towers from day one. In the subsequent 13 years, Indus Towers has constructed over 50,000 new sites, leased up to achieve a tenancy ratio at time of writing 1.86. Indus Towers has 2,339 employees.

For data on Indus Towers’ tower count and tenancy ratio growth, see the infographic “Bharti Infratel and Indus Towers’ tower count and tenancy ratios” in the Bharti Infratel section of this article.

Indus operates in 15 of India’s 22 telecom circles: Andhra Pradesh, Delhi, Gujarat, Kerala, Rajasthan, Kolkata, UP East, UP West, West Bengal, Karnataka, Maharashtra, Mumbai, Punjab, Haryana and Tamil Nadu. Three out of five calls in India are made through an Indus site.

Indus is currently re-inventing itself in two important ways. First, it is merging with Bharti Infratel to create Asia’s largest tower company outside of China. Secondly, it is broadening the scope of its assets and services to realise the vision of Digital India.

Indus Towers is registered as an infrastructure provider (IP-1), the scope of which has always enabled deployment of both towers and fiber, but which was recently extended to allow deployment of active infrastructure such as small cells. This has enabled Indus Towers to ‘Put India First’ by creating public private partnerships (PPPs) with municipalities to create a replicable model for the digital transformation of thousands of Indian smart cities. For example, Indus’ partnership with the New Delhi Municipal Council involves a plan to deploy 3,000 aesthetically integrated, multi-functional smart poles that include Wi-Fi access points, LED lighting, digital billboards and, on selected sites, CCTV and air quality sensors. Indus Towers is also leveraging assets like bus shelters, water tanks, metro pillars, foot-bridges and toll plazas to develop solutions for smart lighting, smart parking and smart water metering.

Indus Towers provides power-as-a-service. By 2018 67,554 of Indus Towers’ sites were zero-diesel ‘green sites’, and the company aims to be diesel free by 2021, which will be a remarkable achievement when one considers the unreliability of India’s electricity grid.

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Announced in Q2 2018, the merger of Bharti Infratel and Indus Towers is expected to be completed in Q2 2019, pending approval from the telecom ministry and the National Company Law Tribunal (NCLT).

The merger will create the largest telecom tower company in Asia (outside China) with 164,261 sites and over 307,500 tenants, with a tenancy ratio around 1.87. The deal involves Bharti Infratel transferring 1,565 of its own shares for each Indus Towers share, valuing the latter at US$10bn. Prior to the merger, Indus Towers is 42% owned by Bharti Infratel, 42% by Vodafone, 11.15% by Idea group, and 4.85% by Providence. While two ownership models were proposed post-merger, it seems likely that Idea group and Providence with cash out, leaving Bharti Airtel and Vodafone holding 37.2% and 29.4% stakes respectively.

Publicly listed Bharti Infratel and privately held Indus Towers have very similar derived valuations (BloombergQuint suggested Infratel was valued at 8.7x FY18 EBITDA, Indus at 8.5x) doubtless due to the fact that Infratel incorporates a 42% share in Indus. The combined entity is forecast to generate revenues of Rs 255,351mn (US$3.66bn), EBITDA of Rs 105,191mn (US$1.51bn) for an EBITDA margin of 41.2%, and profit after tax of Rs 39,091mn (US$556mn).

As there is minimal overlap between the portfolios of Infratel and Indus (they only both operate in four circles: Haryana, Uttar Pradesh (West), Uttar Pradesh (East) and Rajasthan), the merger is not expected to prompt significant consolidation of assets, although it will generate improved RoE due to improvements in the capital structure, tax advantages and economies of scale. Also critical to the reasoning behind the merger is the removal of the holdco discount, which Indus and Infratel has suggested could lead to an implied theoretical uplift per share of 4.8-10.2%.

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RCOM’s elusive tower legacy

Tower count: 43,263

Founded in 2001, Reliance Infratel is, or was, the captive towerco of Reliance Communications (RCOM).

Reliance Infratel was repeatedly put up for sale over recent years, with investors Tillman Infrastructure and Brookfield both securing periods of exclusivity to conduct in-depth due diligence on the business. No deal could be consummated, most likely due to concerns about the investibility of Reliance Infratel’s anchor tenant RCOM. Those concerns were validated when RCOM fell victim to the consolidation of MNOs in India and exited the wireless business, leaving in its wake substantial debts.

The recent apparent resolution of disputes over the claims of minority shareholder HSBC Daisy Investments, and the settlement of those debts, may have cleared the way for the Reliance Infratel to be sold, perhaps to Reliance Jio, which is a tenant, albeit at a discounted rate, on around 32,000 of the 43,263 towers in Reliance Infratel portfolio.

If the reported Rs 180,000mn sale (US$2.5bn), (which includes the Reliance Infratel towers, plus fibre, spectrum and other infrastructure assets) to Reliance Jio closes, it remains to be seen whether the RCOM assets will be bundled with Jio’s own towers and fibre, for which they are believed to be seeking a buyer (see sidebar “Coming soon: Reliance Jio Infratel”).

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A new entrant is joining TowerXchange’s ranking of towercos with more than 20,000 towers.

Innovative 4G operator Reliance Jio has received permission from India’s National Company Law Tribunal (NCLT) to transfer all its existing towers, and all contracts relating to the maintenance of those towers and build of future towers, to carve-out towerco Reliance Jio Infratel – indeed the both Jio’s tower and fibre assets were transferred to separate newcos on 31 March 2019.

The move is motivated by the restructuring of the parent company’s balance sheet, creating an asset-light business model, transferring both significant debt, and responsibility for new infrastructure capex, to the Reliance Jio Infratel entity (and to a sister company focused on fibre). “The end objective will be to have different set of investors who would want to run these companies,” said Reliance Jio joint CFO Srikanth Venkatachari in January 2019. “This means that these assets go off our balance sheets, so the liabilities also go down”.

Reliance Jio will be anchor tenant on all the towers, which will be leased to third parties for co-location. Despite concerns that much of Jio’s passive infrastructure consisted of a lot of lightweight urban poles and rooftop sites, a presentation on parent company Reliance Industries’ website suggests their sites are “predominantly ground based towers with ability to take multiple tenants.” The same site also suggests that the portfolio includes “~175,000 built and under-development towers” with an average age of less than two years, most having fibre backhaul, with grid connectivity and lithium-ion battery back-up.

Reports suggest that Moelis, Citi and ICICI Securities have been appointed to seek investors in Reliance Jio Infratel, and Brookfield are already being touted as a prospective buyer.

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Western Hemisphere pureplay towerco

Tower count: 29,564

SBA is renowned as a high quality wireless infrastructure business. SBA builds and buys high quality towers; they are trusted by clients and shareholders alike. They are a towerco that is acutely aware of, and focused on, their core competencies in the business of providing vertical real estate. Today, SBA Communications’ margins are the best among their peers, and their market capitalisation, on a per tower basis, exceeds even American Tower, reflecting their investors’ faith in the purity of their Western hemisphere, traditional tower and rooftop focused portfolio.

SBA Communications has 29,564 towers spread across 13 countries in North, Central and South America. 80.4% of SBA’s core site leasing revenues are generated from their U.S. tower business, which remains a ‘cash cow’ generating tower cash flow at an 82.9% margin in Q418.

Then Steve Bernstein Associates, SBA Communications was founded in 1989 in Boca Raton, Florida, where the company is still headquartered. SBA started out as a site-finding consultancy for carriers, negotiating with landlords, executing leases, getting zoning approved then supervising construction of towers and rooftops. By 1996 they had established a great reputation, and were the largest site acquisition and construction firm in the United States, at which point SBA started the process to transition into an asset ownership model. SBA acquired 12 towers in upstate New York in June, 1997 – the first of countless acquisitions from ‘Mom and Pop’ private tower owners.

Expansion at SBA has always been driven by both organic and inorganic growth. In terms of organic growth, SBA landed what is believed to be the first build-to-suit (BTS) construction contract with Bell South (a predecessor of AT&T), and SBA continues to secure substantial BTS contracts across their footprint. SBA is also a disciplined buyer of towers, both through sale and leasebacks, and through the consolidation of small and large competitive towercos highlighted by the acquisitions of TowerCo in 2012 (3,252 towers for US$1.45bn) and Mobilitie in 2011 (2,300 towers for US$1.1bn).

Harnessing these twin growth drivers, in June 1999 SBA listed on NASDAQ as SBAC, debuting at $9 per share. Like all the U.S. towercos, SBA came under intense pressure when the Internet bubble burst – at one point their share price dropped to 19 cents and they had to sell 800 towers to become cash flow positive. But where some of their peers faltered, the experience made SBA stronger. Three years later, SBA bought back those 800 towers, and has since demonstrated remarkable growth. At time of writing (March 2019) SBA stock was trading just under US$200, with a market cap in excess of US$22bn. Today SBA is part of the NASDAQ 100 Index. SBA employs 1,347 people, generating annual revenues of US$1.866bn, with an adjusted EBITDA of US$1.305bn – an industry leading 69.9% adjusted EBITDA margin.

Since 2009, SBA has been expanding internationally, starting in Canada, but then looking South into Central America, where SBA is the market leader with over 3,200 towers, and more recently into Argentina, Brazil, Chile, Colombia, Ecuador and Peru. 45% of SBA Communications’ tower portfolio is now outside the United States.

While SBA Communications is perhaps the most faithful tower company to the pureplay ‘steel and grass’ towerco business model, there are signs of an increasing interest in business model diversification, from initial forays into power service provision in Brazil, to an “exclusive asset” business which is exploring small cells, DAS and opportunities in CBRS. SBA deployed their first mobile edge computing site near Gillette Stadium, home of the New England Patriots American Football team.

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Explaining the business model overview section of the table

In the business model overview section of this table you will see an ‘at-a-glance’ index of business model variations. Here is a brief summary of what those filled, lightly shaded and blank cells mean.

“Steel and grass” indicates where the towerco provides only steel structures and real estate across a significant proportion of their portfolio. If the cell is filled then “power as a service” is not provided across the majority of the towerco’s portfolio. If the cell is lightly shaded then and the “Power as a service” cell is filled, this indicates that the towerco operates a “steel and grass” business model at a minority of sites, with “power as a service” in a majority of sites. If the “Steel and grass” section is blank, the towerco provides “power as a service” across their entire portfolio.

“Power as a service” indicates that the towerco is responsible for energy equipment and power availability as well as steel structures and real estate.

“Small cell and DAS”, where the cell is filled, indicates towercos which has made substantial investments in developing and deploying small cells and DAS, either indoor or outdoors, typically with 1,000+ nodes. Lightly shaded cells in this section indicate that the towerco has an earlier stage / smaller small cell and DAS business unit. Blank entries indicate that the towerco has negligible activity in small cell and DAS

“Fibre”, where filled, indicates that the towerco has over 10,000km of fibre in its portfolio. Lightly shaded indicates that the towerco has a smaller fibre business, or both a license and intent to rollout fibre. Blank entries indicate that the towerco has negligible activity in fibre.

“Publicly listed” simply indicates towerco that are publicly listed, with lightly shaded cells representing towercos rumoured to be considering an IPO in the next 24 months, or towercos that are merging with another listed entity.

“Operator-led” indicates towercos where 51% of more of the equity is owned by one or more MNO parent companies. Often referred to as “carve-out” towercos, such entities often have rigorous governance structure to ensure independence.

“Pureplay independent” indicates towerco wherein the majority of equity is owned either by public shareholders, private investors, or management – MNOs do not have a controlling stake.

“JV infrashare” indicates joint venture infrastructure sharing companies where infrastructure assets are pooled and shared between two or more MNOs, often to the exclusion of other MNOs in the market.