DigitalBridge on their entrance into the Icelandic market

In late 2021, DigitalBridge announced the formation of its new Icelandic towerco, ÍslandsTurnar. Acquiring 367 towers from operators, Sýn and Nova, ÍslandsTurnar becomes the first independent towerco in the Icelandic market. Here we speak to DigitalBridge’s James Burke to find out more about the deal and why it made sense for the company.

There are three major operators in the Icelandic market - Síminn, the incumbent; Sýn and Nova (which was the newer challenger in the market). Whilst Síminn marginally has the largest market share, the subscriber base is relatively evenly split between the three operators. 

5G rollout is in the early stages in the country and whilst it is early days, there are very clear rollout and investment plans in place from the country’s operators.

Looking at the tower landscape, Síminn owns the largest tower portfolio in Iceland, with the operator's towers held in its infrastructure arm, Míla (with Míla’s remit including fixed broadband, mobile access and backhaul). Míla has been in existence as a fully owned subsidiary of Síminn since 2007, but in late 2021 investment firm Ardian signed a deal to acquire 100% of the infraco. 

The portfolios of Sýn and Nova, which ÍslandsTurnar has acquired number 367 sites. ÍslandsTurnar is the first independent towerco active in the Icelandic market and as such, with the exception of the Icelandic Emergency Services body, there are no other tower owners present.

Like much of the Nordics, active sharing is also a feature of the Icelandic market. Sýn and Nova have an extensive RANsharing agreement in place. The agreement has a national remit and as such, nearly all towers that ÍslandsTurnar have acquired have both operators present on them.

As the incumbent, regulation has been applied to Síminn/ Míla requiring them to allow other operators access to their tower portfolio at a reasonable rate. As such, Míla has tenancies from both Sýn and Nova on their towers.

Whilst ÍslandsTurnar’s sites do have some tenancies from Síminn, they have historically preferred to use their own infrastructure when rolling out networks. 

The total number of sites acquired from Sýn and Nova is 367 sites. Bar a handful of sites which the operators have retained (plus the broadcast sites owned by Sýn) this constitutes the entire tower portfolios of the two operators. 

The portfolio is comprised of both ground-based and rooftop sites; in Reykjavik, there is a higher proportion of rooftop sites, when you move to more rural areas, the proportion of ground-based towers steps up to a majority.

The majority of sites have been well built (as is often the case with operators building them for their own use) and most sites will be able to handle material increases in capacity without us needing to carry out any major upgrade works. There will of course be some upgrade work required but this will be on a site by site basis. 

Fundamentally through the transaction we have acquired two anchor tenants, both of whom we are supporting on their network investment and upgrade pathway. The two operators have both been leaders in different ways when it comes to pushing agendas with things such as network quality, innovation and 5G and we will continue to support them on this journey. 

Whilst Sýn and Nova’s rollouts will be our main focus, there are of course other players out there such as emergency service networks, ISPs, fixed wireless access providers, IoT networks et cetera, All of these constitute potential customers and, as an independent infrastructure provider, we are well placed to encourage and support the entrance of new players. 

I’m not able to give exact figures but what I can say is that both carriers have a plan that they will be working through over a number of years. The BTS programme we have is not a short-term initiative, rather it is something that will run over a longer term period.

We have two great partners in Sýn and Nova and both have agreed that there are plenty of areas to explore. Obviously the two operators are competitors and so we need to have these conversations with them separately, but there is plenty more scope for additional services and assets, looking at both indoor and outdoor networks. It is something that we certainly expect to be discussing down the line.

For now, the deal is focussed around passive infrastructure and both carriers have well functioning active operations and maintenance teams in place. That being said, our CEO  Joakim Reynisson has effectively built a large part of this network [Reynisson was Chief Technology Officer of Nova for over a decade prior to assuming his role at ÍslandsTurnar] and was a key architect in the RANsharing agreement between Sýn and Nova and so knows the operators and their networks well.

Whilst that is not an area of immediate dialogue in our conversations with Sýn and Nova, generally speaking it is an area that makes a lot of sense. Not speaking specifically about our deal in Iceland, one can see how having two anchors could serve as a bit of a testbed of this kind of arrangement, working with them to achieve deeper synergies in the management of their networks.

Everybody is comfortable with the outsourcing of passive infrastructure and the drivers of that from the operator side, and the investor appetite for the assets is very much there. Outsourcing of the active radio access network is an extension of the same thesis: operators have very intensive capex outlays ahead of them and the investor community is able to take a longer-term view and finance that capex more effectively than the retail exposed carriers. 

What I would say, however, is that the carrier is responsible for the end user experience, so the quality of the signal and the upload and the download speed. This is a huge component of your core business to be putting in someone else’s hands. It’s a much bigger leap than say, extending the passive infrastructure perimeter to include battery back-up, fibre to the tower or microwave linkage. You are stepping into the core user experience. It is a very different ballgame right now, but I do think that overall, the same pressures on carriers and the same appetite from investors are there. Looking at the industry as a whole, I definitely expect to see more RAN outsourcing coming.

Joakim was widely recognised as a clear and obvious candidate for the role of CEO, with a track record of building networks, not just in Iceland but also other countries. We were very fortunate to secure someone of his experience and calibre to lead the business.

The deal was closed in December and as you would expect, we are now in a transition period, setting up the company, and all the systems. With DigitalBridge having established nine tower companies around the world, we do, however, have a playbook when it comes to setting up a towerco. We have systems and processes in place, many of which have been established by Vertical Bridge, our towerco in the US. We are able to pivot a lot of that knowledge and expertise very quickly into a new business.

As the CEO, Joakim will instantly benefit from a network of other CEOs around the world, many of which have just done what he is currently doing. In terms of setting up a company, that is a big part of the power of the DigitalBridge ecosystem and platform.

In terms of the broader company, it will be a lean team but will have all the appropriate resources covering functions including operations, engineering, planning, sales, finance and administrative support.  

Iceland was a market which we had specifically identified, it has three strong carriers, two of them with a national RANsharing agreement in place. In early discussions with both Sýn and Nova it became clear that the stars were aligning, with both operators simultaneously looking for innovative and creative ways to drive their 5G network investment programmes. We had also identified early on, that that there was a great leader in Joakim to help us along this journey.

The deal gives us two strong anchor tenants in an attractive market. Along with our investment in Digita in Finland, the deal in Iceland plays into our strategy to become the largest, independent tower platform in the Nordic region. There are obvious synergies that can be achieved through a presence in two markets in the region and we look forward to the journey ahead.

About James Burke

James Burke is a Principal at DigitalBridge, Investment Management. Mr. Burke is based in London and focuses on European investments and opportunities. He is an accomplished infrastructure investor with over 12 years of sector experience.

Prior to joining DigitalBridge, Mr. Burke was a Director at Alinda Capital Partners, one of the largest infrastructure investment firms operating in North America and Europe with a focus on telecom, energy, transportation, and contracted infrastructure assets. Prior to Alinda, Mr. Burke began his career in London as an M&A Analyst in the Global Infrastructure Group at Citigroup.

Mr. Burke currently serves on the Board of Directors of Vantage Europe, Digita Oy, FreshWave, Wildstone and AtlasEdge.

Mr. Burke received a Bachelor’s degree and a Master of Arts Degree in Chinese Studies from Cambridge University.