"Mobitower has a huge opportunity in plugging Egypt's massive demand gap"

Hello and thank you for the question, my name is Emad El Sadek, CEO of The Egyptian towerco Mobitower. I have deep roots in providing a host of connectivity infrastructure services in the Egyptian market, overseeing 10,000KM of fiber cable deployments across the country plus 700 transmission nodes (SDH&PDH) with AT&T as the head of their Optical Networks group & Transmission Department.

I then joined Mobiserve, a subsidiary of Orascom Telecom Group, to head their technical department to execute GSM site rollout and O&M to all telecom towers in 8 international markets belonging to Orascom Telecom.

In 2007 I became the CEO of MENA Submarine cables system (Orascom telecom company) where we constructed 9000 KM of submarine cables in the Red and Mediterranean Sea’s. In 2010 I became CEO of Alkan Networks. I oversaw the construction and maintenance of Vodafone Egypt’s telecom towers network and other MNO’s, totalling around 10,000 sites deployed.

I was CEO of HOI-MEA, manufacturing telecom towers and camouflage solutions, managing and negotiating tower sharing contracts for their 40 sites. For 3 years prior to joining Mobitower I was the CEO of Benya Engineering, one of Benya Capital’s technology subsidiaries before Benya capital assigned me to manage Mobitower.

Mobitower is a greenfield build-to-suit towerco providing full end-to-end tower sharing services from construction and deployment to colocation and operation. When I was with Mobiserve, we produced towers under the name of ‘Mobitower factory’, but the decision was made to form a separate new tower-sharing company called ‘Mobitower’ established to provide build-to-suit and tower-sharing services.

After Mobitower changed hands a few times, from Mobiserve to MobiEgypt, Benya acquired the business through a consortium agreement called Benya Towers/ Mobitower under the tower sharing license of Mobitower.

We have a contract to deploy 292 towers as part of the governments Hayah Karima (decent life) initiative, with Telecom Egypt as our anchor tenant and are due to finalise a contract with Vodafone imminently as a 2nd tenant, as well as a build-to-suit agreement in addition to Orange and Etisalat still under discussion.

Although Mobitower has been a licensed towerco for 12 years, we did not originally start as a tower-sharing business until we joined Benya via a consortium agreement. Benya Group is one of Egypt’s leading ICT infrastructure providers, offering a range of connectivity infrastructure services in fiber, active and passive equipment, constructing and operating hyperscale data centers in Egypt belonging to the government.

Looking to complete the telecom infrastructure package, Benya wanted to also provide tower infrastructure and decided to work with an existing tower company to secure the required licensing. Benya established a consortium agreement with Mobitower to manage them completely.

While the government has been licensing towercos to operate in the country for some time, the NTRA has discovered that the tower sharing business has not been running well and largely failed to develop as an active sector in the telecoms space.

In response, the government launched the Hayah Karima, or Decent Life in English, project which is monitored by President Sisi himself, specifically targeting rural areas that lack many core infrastructure services such as connectivity, water, transportation and energy.

For phase 1 of the project the NTRA issued a tender for 491 new towers in these villages and after submitting our offer we were privileged to win the tender. Now we are constructing 292 towers under supervision of our parent company Benya, with 10 towers already on-air and 25 constructed. What is particularly important about this project is that it is the first time where the tower permits are under the name of the towerco, where before the permits would sit under the MNO. This is a huge achievement and will really kick-start the tower sharing business in Egypt. We hope to finish the project in the new few months, to be ready for stage 2.

There is no solid outline for what phase 2 will entail at this point, but the government has identified around 4,500 villages across Egypt which lack connectivity, and the end goal will be to provide connectivity services to all of these. Stage 2 will be another tender for around 1,200 sites but the timing of this isn’t known yet.

Our anchor tenant is Telecom Egypt who, like Mobitower in the passive side, won the NTRA’s tender for the active side of the project. The NTRA has introduced a new strategy to incentivise rural coverage, providing the rental fee to the towerco on behalf of the anchor tenant, essentially renting one tenant on the towers on behalf of the MNO. The low ARPUs (average revenue per unit) of rural sites mean there is no business model and MNOs aren’t interested, but with the government taking over the upfront rental fees the business model becomes feasible for the MNO and will encourage the other MNOs to become second and third tenants.

Once the anchor tenant has been established to provide services in phase 1, we will then start to bring in a second and third tenant in phases 2 and 3. As the tenancy cost goes down with increased colocations we should get to the point where the business model becomes profitable.

The Egyptian market has around 28,000 towers, which is far below the required 50,000 towers needed to meet the country’s population and subscriber count metrics. Due to this tower deficit, Mobitower has a huge opportunity in plugging the massive demand gap for tower infrastructure through network rollout and build-to-suit. But we are also in discussions with investors, as well as with Benya, about potential acquisitions.

I have had numerous discussions with investors who recognise the need for a strong towerco in Egypt and are keen to identify a possible route-to-market for sale-leasebacks in addition to BTS. I can’t say too much about this as there is still plenty of discussions to be had, but we can assume that there will be some SLB deals in Egypt this year between towercos and MNOs.

The biggest roadblocks to sale-leasebacks are that they are very capital-intensive and will require significant planning and support from investors, partners, MNOs and the government. We are also expecting to see new NTRA priorities that may require us to acquire a portion of towers through M&A as well as build-to-suit.

The devaluation of the Egyptian pound has resulted in significant cost increases. We have already started price negotiations and these discussions are always tough; as a towerco you need to always consider the rental price. We walk a fine line between managing our own costs while acknowledging the impact this is having on our MNO partners and trying to accommodate their own capex increases.

Thankfully, we are starting to see approximate costs stabilising, and more importantly the government has come to understand the impact of market conditions on the telecoms sector. After many rounds of discussion, the NTRA has accepted a realistic tenancy price increase on the Decent Life project to help mitigate increased cost of tower deployment and operations. In the past the government would have continued to put these discussions off, but the market has matured enough where all parties understand how the economic environment impacts tower construction and services.

Egypt is a huge telecom market with a large population and a shortage of telecom infrastructure, meaning there is plenty of opportunity for growth. The government is also taking notice of decades of underinvestment and is starting to launch projects like Hayah Karima, something which we haven’t seen for 20 years. For the first time, the government is demonstrating an understanding of how important ICT infrastructure is to the economy and to digital transformation. Despite the risks, Egypt is a big opportunity for investors.

We have already seen GCC (Gulf Central Countries) and foreign investors expressing a keen interest in the Egyptian market. Devaluation has made local companies and infrastructure much more attractive for acquisition or investment and these valuations are starting to stabilise, indicating the market is recovering and will start to increase soon. If investors want to make the most of the situation, they will need to capitalise now while the opportunity is there.

We also see intention and strong support from the government to build up Egypt’s long under-invested ICT infrastructure, planning for issuing licenses for data centers and encouraging investors to invest in the sector. This all-forms part of the government's plans to digitize and automate the economy, which is a major part of their development strategy.

Finally, I’d like to thank you for having this opportunity and for the fruitful discussion.