TowerXchange at MWC: Investing in Africa

At MWC this year, TowerXchange sat down with Sainesh Vallabh, Chief Commercial Officer and Regional CEO Southern Africa at Helios Towers, to discuss what he thought of the conference; what’s different about doing business in Africa; and how Helios Towers is part of a broader network of stakeholders seeking to invest in African progress and development.

Unsurprisingly, the biggest theme at MWC this year is AI! 5G is everywhere, as it has been in recent years, but AI is the top topic people are discussing. The jury is still out on the returns of AI investment and people are still trying to understand “What is the application of AI? What is the actual benefit? Where are the cost savings or new revenue lines?”

Energy has been important here for many years, but there is a lot more focus on energy optimisation this year. Not just green energy production, but other ways to engage with energy are being considered; how we can be more efficient as an industry by switching to less energy intensive equipment, or turning cell networks into virtual powerplants where cell tower energy equipment gives and takes from the grid. As well as this, the industry is thinking about how we are going to power all the compute required for AI.

Finally, I’d say that the event also feels more “European” and less “global” than prior years. With the onset of more telecom events in Africa, there’s a greater European presence here this year. The themes are more pointed towards the issues facing Europe, whereas we have other events where we can discuss African issues, like TowerXchange Meetup Africa.

There's a clear correlation between the ability to communicate and GDP growth. In Africa we've played a phenomenal role through our customers to connect the unconnected.

A case in point is Madagascar. We have built over 100 sites since we entered the market which has created coverage for over one and a half million people for the first time; that's about five percent of the population. And in a world where a 10% increase in population network coverage creates an approximate 0.8% increase in GDP, that’s massive. It could be even higher as those towers enable e-commerce and micro-payments for millions for the first time.

In the DRC we built 300+ sites last year. A big portion of them were new coverage and connected millions of people for the first time. Other sites were built to drive network densification, which delivered 4G coverage for the first time to millions of other end users too.

We are now coming out of a period where we conducted major M&A to effectively double our platform. With that came a lot of inefficient sites. So, we have spent the last few years working through the assets we bought and making them operate to our high standards. When we entered Madagascar uptime was poor, but we have reduced downtime by 83%; in Senegal downtime has been reduced 90%.

From an operational standpoint, we've carried out huge amounts of investment and process improvement to reach and maintain virtually 100% uptime. This means that across over 14,000 sites we’re enabling our tenants to deliver reliable connectivity to their customers.

We have also sped up site deployment. Our average build-to-suit time in 2022 was over 200 days which we have brought down to 150. Our target is to have a 90-day process for build-to-suit and to add a co-location within 24 hours, which current time is five days. Big improvements have already been made but we are continuing to strive for even faster delivery.

Directly or indirectly, we cover all the Millennium Development Goals. Our strategy in particular focuses on sustainability, but we also focus on the promotion of diversity. Our industry is fairly male-dominated and we are responding to this not just by focussing on gender diversity, but also on diversity across the board. An example that comes to mind is South Africa. When we entered into South Africa through an acquisition a few years back, it was a 100% male business and we are now at 50%.

Diversity is an enabler of our wider mission. Through the support of our customers and the spread of connectivity, we enable the eradication of poverty through economic development. We promote the enablement of medical services where they weren’t previously available. Our strategy and our business covers all the Millennium Development Goals, it is part and parcel of what we do and we engage with customers and investors on that basis.

It varies by market. It’s only recently that in some markets, 4G is expected to overtake 3G as the dominant technology in the coming years, but as you say, there is a lot of growth still to come.

The number one challenge is regulatory. By this, I mean the availability of 4G spectrum that operators can use effectively and the market conditions that enable them to grow. Allowing the industry to experiment with business models and develop new propositions will do a lot to help connect people.

The second is the cost of deployment for our customers. We provide the passive infrastructure at as competitive a cost as possible, but the cost of active network equipment is still inhibitive to network development at current ARPUs.

Third are financial issues. Inflation is an issue globally, but FX deterioration in number of markets across Africa and an increase in the cost of deploying capex domestically has affected many of our customers. With capital availability limited, you also get urban sites prioritised over a general mass rollout which further slows down 4G adoption.

The road forward for African connectivity is not the responsibility of a single party; it's a collaboration between regulators, governments, financiers, and industry to create the right ecosystems for development. There has been a lot of collaboration between these stakeholders, but more needs to be done.

Interconnection between African countries is critical. Currently, data is transmitted via subsea because there’s not enough overland connectivity. More connections between states and regions are needed to improve network quality, speed and capacity. There are new data centres being constructed in Africa and they face similar challenges to us. Data centres are a different type of business model, but the lack of power infrastructure unites us.

Beyond regulation of carriers, there are disconnects in government strategy. Network equipment necessary for 4G can be subject to customs duties, which is counterproductive. 4G deployment needs to be ubiquitous to provide even development, rather than just in the urban centres that maximise returns. For rural coverage you don’t get the same kind of return so there needs to be more engagement from a regularly and ministerial perspective.

Across our 14,000 towers, we have average electricity availability of about 16 hours a day, but we see huge variance across this. In some cases, it's zero, while on other sites we can rely on 23 and a half or 24 hours grid connection. To make up that balance we must rely on batteries, renewable energy and of course diesel generation as a backup or last resort.

We would prefer to use power from the grid, and we have an active engagement strategy for the grid operators in our markets. Moving to full grid availability would be transformative for the sector and the wider economy. Therefore, we actively engage with utilities in our markets to encourage and enable new developments.

As well as improving operational performance it would also make our industry cleaner. We may only get six hours a day grid of availability in the DRC, but when we do have grid power its very clean because the DRC is so reliant on hydroelectric power.

We are looking at supporting other grid power options like working with mini-grid companies on a smaller scale. That is a live option, but it is held back in part by regulation. We cannot take all the energy a mini-grid provider could generate and therefore they need an enabling regulatory environment to sell power to other domestic, commercial and industrial customers.

The biggest challenge in Africa is a lack of infrastructure. But that is also what gives us our purpose as a business. You need the right skills, the right partnerships, the right local knowledge. That’s why we focus on developing local talent and staffing in each geography. The other difference is size. We operate in countries that are 10 times the size of the UK but have 1% of the paved roads.

In the DRC, there are areas in the middle of the country where we need to deliver sites for our customers. We can't get equipment there conventionally because there are no roads. So, what do we do? We dismantle equipment, send it up waterways and rivers and reassemble it in place. That requires enormous technical skills and ingenuity. That’s an extreme example, but it happens.

We've seen capital become much more expensive and this looks like a new long-term reality we all must deal with. That is having a particularly strong effect in Africa and is creating a new focus on optimising how we run our business. So that brings us to where we started, how can we use new technology like AI to run a better towerco and deliver for our customers?