Read this article to learn:
- Towerco activity in Egypt to date
- Details of the revised towerco licensing framework
- Parties interested in the towerco licence
- The scale and growth potential of the Egyptian tower market
On 10 August, Egypt’s regulator, the National Telecom Regulatory Authority (NTRA) announced a revised framework for the issue of a new towerco licence in the country. The new licence will include a rollout obligation of up to 6,000 new sites over the next three years and, with such a scale, has attracted the interest of a number of major international parties. TowerXchange examines the new terms and conditions of the licence.
The Egyptian market requires significant new build, with the country having a growing subscriber base, one of the highest number of SIMs per tower and an extensive rollout of 4G still required. The use of a towerco to meet such new build requirements will preserve much needed capex for MNOs to invest elsewhere, yet to date, towerco activity in the Egyptian market has been limited.
Back in 2010 and 2011, five Egyptian companies – EEC, Alkan, ECMTS, Mobiserve’s Mobitower and HOI MEA (now simply branded HOI) – were awarded towerco licences valid for a 15-year period, but only HOI built towers, with their portfolio standing at a modest 38 sites. In 2016, Eaton Towers (which has since been acquired by American Tower), reached a deal to acquire 2,000 of MobiNil’s (now Orange) 6,000 sites but the deal was cancelled. A couple of years ago, the NTRA announced it was to award two new towerco licences, with a number of local and international parties having applied for the licence but nothing awarded to date. On 10 August, the regulator announced a new framework, inviting the industry to submit comments and questions before 15 August.
Details of the new licensing framework
Under the terms of the new framework, the new licence will be for a 15-year period with an upfront licence fee payment of US$3mn and annual licence fees equating to 3% of the annual turnover (to a minimum value of EGP500k). The licencee will need to provide a performance bond letter of guarantee with a value of up to EGP10mn (~US$625k), and commit to spending a minimum of 0.5% of annual turnover on R&D, whilst abiding to the universal service rules, regulations and fees set by the NTRA.
One of the most significant developments under the new regulatory framework is the requirement to have a minimum of 20% local ownership in the licencee (as well as a minimum of 20% international ownership). In the case of the first towerco licence, this local 20% ownership should be held by the established company “Egypt Towers” which is owned by the government.
All applicants for the licence will be required to own a minimum of 5,000 existing towers and have been active for a minimum of three years in building wireless infrastructure, with their portfolio valued in excess of EGP3bn (~US$187mn) and revenues having exceeded EGP200mn (~US$12.5mn) in the past two years, ruling out smaller or less established companies who had been eyeing up the market.
The towerco will have a rollout obligation to develop a portfolio of 5,800 sites in the first three years – a figure significantly higher than had been indicated in earlier licensing discussions. Of the 5,800 sites, 1,000 sites are to be added in year one, 2,600 in year two and 2,200 in year three, with a minimum of 70% of sites required to be new build, and up to 30% allowed to be acquired from any of the country’s four operators. Whilst the new framework speaks of towers, there is no mention of small cells, in-building solutions or smart poles in the rollout obligations.
The licencee is required to have a minimum of one contract with one of the operators before building towers, although following NTRA approval will be allowed to build the tower without an MNO contract in place. In addition to renting of space to the country’s MNOs, the licencee will have the right (pending NTRA approval) to lease space to other third parties.
Penalties for being unable to meet the rollout obligations are not specified in the regulatory framework, with the NTRA stating that this would be discussed with applicants.
The NTRA has invited potential applicants to submit feedback and to participate in a Q&A on the new framework being held on 15 August.
Who are the interested parties in the licence?
A number of parties have been linked to the Egyptian towerco licence:
The world’s largest independent towerco with a portfolio of over 180,000 sites across the US, Latin America, Europe, India and Africa. The company is highly acquisitive, its most recent deal being the acquisition of Eaton Towers which closed at the start of 2020, with the Eaton team having experience of the Egyptian market through their cancelled deal with MobiNil. American Tower is known to have been on the ground assessing the Egyptian market for the past couple of years through its consultant Mostafa Sobh (who also worked on the Eaton deal before it was cancelled).
Pan-African towerco with a portfolio of over 7,000 sites on the continent and an appetite for further geographic expansion. The company recently announced a deal to acquire 1,220 sites in Senegal adding a sixth market to its countries of operation and is reported to maintain a keen eye on the Egyptian market.
With roots in the Nigerian market, IHS’s operations now span three continents and nine countries (Brazil, Cameroon, Colombia, Ivory Coast, Kuwait, Nigeria, Peru, Rwanda, Zambia), with their tower count approaching 28,000. Their most recent deal was the acquisition of Cell Site Solutions in Brazil in February of this year and the company continues to evaluate new opportunities for geographic expansion.
Saudi Arabian towerco with a portfolio of 14,200 sites carved out of Saudi Telecom Company, TAWAL has made no secret of its plans to expand its activities to other markets. STC has signed an MOU to acquire Vodafone’s stake in Vodafone Egypt and looks set to enter the country, making Egypt a very attractive market for TAWAL to enter.
Towerco founded in 2019 by a team of highly experienced executives with significant emerging market towerco experience, including former ATC employees, Steve Harris, Steven Marshall and Hal Hess (with Moustafa Sobh bringing Egyptian experience as Paradigm’s North African advisor – having worked with ATC and Eaton in the market). Paradigm Infrastructure has a focus on emerging/ growth markets and whilst it does not meet the new framework’s prerequisites in terms of number of towers and years in operation, the towerco could explore the licence through a partnership model should the conditions not be amended.
The world’s largest towerco, China Tower was formed initially as a joint venture between China’s three MNOs, absorbing their 1,44mn legacy towers. The company has since built over half a million sites, with their portfolio standing at 1.99 million towers. The company has yet to extend their presence beyond Chinese borders but is rumoured to have been looking at the upcoming towerco licence in Egypt.
Formerly known as Equinox Egypt, Fibre Misr is a leading provider of ICT solutions and services in Egypt and so whilst lacking the tower background, provides significant local expertise to partner with a towerco player.
Whilst such players have expressed an interest in entering the Egyptian towerco market, to what extent this appetite remains following the introduction of the new framework is yet to be seen.
What time frame could the licence be awarded in?
Beyond the Q&A session on 15 August, no timelines have been laid out by the NTRA although observers expect a relatively quick turnaround off the back of industry feedback. The NTRA plans to issue the first towerco licence before opening applications for a second licence.
What is the current tower landscape in Egypt?
Bar HOI-MEA’s 38 towers, all of Egypt’s telecom towers are owned by the country’s MNOs. Vodafone has the largest tower portfolio, sitting at around 8,500 sites, with Orange and Etisalat each having around 7,800. Telecom Egypt’s tower portfolio lags behind that of its peers (approximately 2,800 sites) with the company only having launched mobile operations in 2016.
All operators have spoken of the requirement for a significant amount of new build with Orange putting in place goals to add 700 new sites in 2020, Telecom Egypt 1,000 new sites and Vodafone and Etisalat in the region of 300-500 new sites each for 2020 (although plans have been somewhat delayed by the COVID-19 pandemic).
Such new build requirements are driven by both capacity and coverage; Egypt has a growing subscriber base and an already high number of SIMs per tower, and whilst 4G rollout is more extensive in major metropolises, outside of this there is major work to be done, particularly given the number of new roads and compounds being built that lack adequate coverage. Egypt is expected to launch 5G in 2021/2022 which will certainly require more sites and towers to provide the necessary 5G coverage.
Infrastructure sharing is already widespread in the Egyptian market, with Orange reporting back in 2017 that around 20% of its owned sites are shared with other operators, and that they leased space on 1,000 sites owned by other MNOs (these figures are likely to have increased since the rollout of Telecom Egypt’s network).
Such strong appetite for new site build, coupled with a culture of infrastructure sharing in the country creates an ideal opportunity for a towerco entering the market. Whilst the license framework speaks of scaling up to 5,800 new sites in the first three years, Paradigm’s North African consultant Moustafa Sobh, told TowerXchange that in reality the figures could be much higher: “With the full support of the NTRA and Egyptian government (thanks, in part, to the inclusion of the Ministry of Telecommunications in the joint venture [via Egypt Towers]), the new towerco entering the market could have the potential to scale up to more than 10,000 sites in less than three years once M&A opportunities with the country’s four MNOs are explored.”
As one of Africa’s largest and most attractive mobile markets, all eyes are currently centred on Egypt as the industry awaits further news on the award of a new towerco licence.