ESG is a topic that has never been far from the core of the towerco model; supporting economic, social and environmental development by making mobile connectivity more accessible, affordable and less carbon intensive was at the heart of our discussions at TowerXchange Meetup Africa.
ESG has made great progress transitioning from a nod to corporate social responsibility, to becoming incorporated into the core of the towerco business strategy across all verticals of the company.
But more coordination is needed both internally and externally across a multitude of stakeholders from governments and regulators to MNOs, suppliers, investors, shareholders and end-users.
Towercos are moving beyond the E
This close relationship between the towerco model and ESG is reflected in the integrated business strategy that offers sustainable value to shareholders. In Africa mobile penetration increases of 1% are linked with increases in Africa’s GDP by 2.5%, having wide-ranging benefits across education, healthcare and financial services.
Helios Towers’ 2026 business targets are focused on value creation and driving climate action, gender diversity and population coverage, while SBA Communications has committed to the UN sustainability development goals and a part of US Global Impact, integrating these into all activities of operations.
IHS Towers’ four pillars of its sustainability strategy include ethics & governance, environment, economic growth, and people & communities. All this goes far beyond the ‘E’ in ESG.
While ESG has more commonly revolved around carbon reduction, regulators are increasingly looking at the social development aspect of increasing mobile penetration as just 25% of people have access to mobile internet.
The all-too-common lack of health and safety frameworks in many countries is also putting greater emphasis on better corporate governance, within towercos and across the supply chain.
In response, speakers discussed the more holistic approach that is being taken to promote diversity, equity and inclusion (DEI) initiatives in a way that defines how they are doing business; whether this is around risk management, relationship management and supply chain management.
In emerging markets, corporate governance is a particularly important pillar of practice, with the importance of integrity to reduce bribery and corruption. Government entities can be opaque and understanding the licensing framework can be a challenge, so having good governance practices is vital.
IHS Towers has a Communications and Sustainability manager in each operating country, which is allocated a budget (US$17.5mn this year) to promote ESG initiatives, taking a ‘bottom-up’ approach to understand what each branch needs to achieve their goals.
These initiatives go beyond the towers themselves and into the local communities, particularly around education and people with many female-oriented.
This has helped promote IHS Towers and the tower industry to the wider community, moving from a rather obscure and unknown business-to-business device to having exposure with the peoples and communities in the countries they operate in.
Rural coverage offers great returns on development, but not investment
Local community development has its greatest impact in rural areas, where mobile connectivity can revolutionize the lives of people living off-grid. Key to this is understanding these communities and their true needs.
Mobile connectivity is a fantastic start, but hardly the end point, and the true value that the industry can bring goes beyond towers to provide that additional benefit.
Opportunities to provide power, for example, can multiply the value a towerco has on a local community, although the microgrid space remains a yet untapped opportunity due to the challenging business case.
However, as socially beneficial as rural coverage is, the economic and investment returns are less rewarding. Outside the ultra-rural network-as-a-service providers, who are still perfecting the minimum capex/opex revenue-share model (and even then are barely making it work), towercos have yet to figure out the business model for rural coverage.
Most rural sites deployed by the major towercos are done to support their customers and local communities, and therefore are rolled out in limited quantities.
Carbon reduction is king, but more solutions will be needed
While carbon reduction is a unanimous goal in the industry, both for the towercos themselves, their shareholders, customers, governments and end-users, it must be done in a way that is as financially effective as it is carbon effective.
Africa remains hugely reliant on diesel to maintain tower networks, and divesting away from this towards more sustainable solutions will require immense capital to achieve. If the costs aren’t feasible, towercos won't be able to achieve this at scale.
The key to achieving this will be embracing new innovations, solutions and technologies that can help towercos transition towards more renewable and efficient sources of power generation while also offering great ROI.
Speakers discussed that while there is no clear roadmap on energy transition, all the towercos are in the testing phrase of various new products and services.
Solar hybridisation remains the mainstream solution, although spatial limitations and increasing site loads mean this will only go so far, while electrification wherever the grid is cheap and reliable is another popular choice to reduce consumption.
The adoption of new technologies beyond this will take time, and currently the focus is on educating investors to help them understand the value of a business that can overcome operational constraints to deliver social and economic impact.
Coordination with investors
Africa’s rather unique advantage when it comes to ESG is that development finance institutions (DFIs) are major investors in the industry, who are acutely aware of the importance of environmental, social and economic development as well as strong returns on investment.
The green agenda has also made aggressive action on carbon reduction a priority for shareholders. However, one speaker raised a potential misalignment in shareholder and investor interests depending on what information is being disclosed.
Understanding what investors are interested in and adjusting the reporting structure of towerco performance can help provide more transparency and insight into the value their investment is creating. Sometimes operational targets are being met but aren't reported, so better exposure is needed.
SBA Communications has been working on a feasibility study working with accounting boards, climate study groups and credit ratings agencies to try to find a consensus between how the company and its shareholders.
Where do we go from here?
ESG will continue to cement itself into the strategic pillars of the towerco industry in Africa. Towerco carbon reduction targets, as well as those of their MNO partners, continue to drive investment in energy hardware and software solutions to make sites cleaner and more efficient.
However, this needs to be delivered in a way that makes financial and operational sense. Spatial limitations on urban sites means solar isn’t enough, so a myriad of batteries, solar and alternative fuels, as well as efficient backup generators, will all be needed in unison to deliver on these promises.
All this needs to be done while grid quality declines in key markets and the adoption of 4G and early 5G technology further pushes up site loads.
Shrinking the connectivity gap is also at the top of the agenda for governments and regulators, who are mandating national coverage and driving rollout into rural communities. Towercos have a key role to play in bringing connectivity in a sustainable way, playing a foundational role in local communities.
However, network-as-a-service has proven to be a challenging business model for contemporary towercos with companies such as AMN, NuRAN and Vanu winning rural contract with major MNOs. Finding a balance between supporting local communities and making it financially viable will be key to delivery.
