TowerXchange’s analysis of the tower market in the Middle East & North Africa

The Middle East and North Africa is the region the least penetrated by the towerco business model globally. With the exception of Pakistan (which TowerXchange has grouped into our regional coverage), there have been no tower transactions of scale, and whilst a handful of build-to suit towercos have emerged, fewer than 1% of the region’s 273,998 towers sit in independent towerco hands.

In North Africa, some operators have embraced infrastructure sharing more readily than their counterparts in the Middle East, with an active sharing agreements in place in Tunisia and approximately one third of towers in Egypt being shared, but on the whole infrastructure sharing between MENA MNOs has been limited.

Yet the winds of change are upon us.

In Kuwait, IHS Towers have reached a deal to acquire Zain’s 1,700 sites (with the deal expected to close imminently) and on 28 November it was announced that Zain had reached an agreement for the sale and leaseback of their 8,100 Saudi Arabian towers to the towerco. In Oman, Omantel are expected to announce a tower sale imminently, with approximately 2000-2500 ground based towers, and roughly double that in rooftops up for grabs.

Further MNOs in the region are also understood to be studying tower sales closely, attracting the interest of towercos and investors in this virgin territory. Rumours have circulated that Tunisie Telecom may consider a sale of their tower portfolio, Djezzy (in which VEON are major shareholders) is known to have previously explored a tower divestment and is rumoured to retain that appetite to sell, and should Zain Group’s transactions go ahead successfully in Kuwait and Saudi Arabia, one can expect their tower divestment strategy to spread to other markets.

Some operators have explored different paths. In Iran, number one and number three MNO MCI and Rightel have opted to form a towerco venture – Iranian Towers – in partnership with domestic towerco, Fanasia. In Saudi Arabia, Saudi Telecom Company which had previously looked at both a joint venture and a tower sale has now set its sights on carving out an internal towerco to better manage its portfolio of 16,400 towers, establishing Communications Towers Co Ltd in early 2018. The entity is yet to start commercial operations, with regulatory approvals still pending but observers expect this to be resolved by early 2019. The operator invited bids for a management contract in its new tower venture, although their reluctance to hand over any equity has deterred most of the major towercos from participating.

The ESCO model is also gaining traction in MENA as an alternative outsourcing strategy. In Lebanon, Alfa has signed an ESCO contract with IPT PowerTech, whilst In Egypt, Orange (which in 2016 under the MobiNil brand had reached an agreement to sell 2,000 towers to Eaton Towers; a deal which didn’t obtain regulatory approvals) has issued an ESCO RFP. TowerXchange has also been made aware of further MNOs on the cusp of announcing ESCO RFPs.

In markets where new build is required, operators who may not necessarily be considering a tower divestment, are opening up to the idea of working with independent towercos in a bid to rollout new sites in a a less capitally intensive manner. Several major towerco names have been linked to the Egyptian market, where new build requirements are particularly high, both for established operators and new market entrant, Telecom Egypt. New build to suit players are also starting to emerge across the region, some of which have an appetite for tower acquisitions, should towers come to market.

As the region begins to open up to the independent towerco model and infrastructure sharing, there is a pressing requirement for governments and regulators to create supportive legislation. In this regard, progress in many markets has been slow and continued support and education on the merits of shared infrastructure and towercos remains key. Whilst a small market, with just 1500 towers, Bahrain’s regulator has been one of the most proactive. In early 2018, the country’s Telecommunications Regulatory introduced the Public Radio Communications Stations Regulation, designed to regulate the deployment of new towers and encourage infrastructure sharing in the country.

The advent of 5G and the move towards smart cities is necessitating major investment in densifying telecom networks in many of the most developed countries in the MENA region. How to achieve such densification, whilst often contending with declining ARPU and increased taxation, is causing operators to consider new business models and potential infrastructure sharing strategies.


Whilst the MENA region has a number of common threads including a number of operators active in multiple markets, a central role of government in business, a strong Arabic influence and similar climates and geographies, it is also important to note the stark differences across different markets; From the highly developed GCC countries pushing towards 5G and decommissioning of parallel infrastructure, through to the war torn countries of Iraq, Afghanistan and Syria where network rollout, restoration and power remain top concerns in operationally challenging markets.

TowerXchange examine the dynamics at play in 16 countries across the MENA region, exploring key MNOs and their tower portfolios, the level of infrastructure sharing and presence of towercos, network expansion required and operational challenges present.

On 29-30 January 2019, in response to the momentum in the market, TowerXchange will bring one of their world renowned Meetups to Dubai for the first time; assembling the who’s who in the MENA tower market. If you would like to get involved, please contact Laura Graves, Managing Director, EMEA at lgraves@towerxchange.com For more information visit https://www.towerxchange.com/meetup/meetup-mena/

Figure one: Tower counts across MENA markets

Figure two: Footprints of MENA’s major MNOs

Figure three: Heatmap of tower deals and towerco activity in MENA


Country analyses

Afghanistan

Subscribers: 33.5mn

Tower count: 6,645

MNOs: Five

Towerco activity: Asia Consultancy Group

Afghanistan has five MNOs, Afghan Wireless (AWCC) which is the country’s fastest growing MNO, Roshan which is funded by the Aga Khan Development Fund and is the country’s largest MNO, multi-national players MTN (which has hinted at exiting the market) and Etisalat, and newcomer Afghan Telecom which is part of the Ministry of Communications and Information Technology. Telecommunications remains an important sector for the Afghan government, with Afghan Wireless understood to be the largest tax payer in the country.

Each of the operators own pretty much of all of their sites, with the MNOs understood to have between 1000-1500 towers each. The Telecom Regulatory Authority of Afghanistan (ATRA) states that there are 6,645 base stations in the country, and with limited infrastructure sharing one can assume that a rough proxy for the number of towers.As the country’s newest player with just 5% market share, Afghan Telecom’s network is smaller than that of its competitors and the operator has recently inked a network sharing deal with Etisalat. Afghan Telecom currently uses around 60-70 of Etisalat’s towers, with plans to extend this tower sharing arrangement. Networks are better established in Northern and Central regions, although Afghan Wireless is still investing in Southern regions of the country.

Since the MNOs entered the market in the early 2000s, the security situation has deteriorated significantly. The Taliban demanded the shutdown of a significant number of sites to avoid surveillance by national and international security forces; where these demands were not met many sites were blown up. MNOs have been reluctant to invest and so there has been little activity in terms of new tower build or co-location. Frontier Tower Solutions had operated in the market in the earlier days, building, operating and maintaining sites for Afghan Wireless but the towerco has since wound up operations in the country. Afghan managed service provider, Asia Consultancy Group, owns ~100 towers which it makes available for co-location and RANsharing services.

99% of sites run on gensets – even in cities – and the biggest challenge is getting fuel delivered to sites. Solar solutions had been examined but the payback period means that MNOs have been reluctant to invest. There are few to no major international contractors operating in the market outside of the military (with foreign troops also having massively reduced their presence, a factor which caused a drop in subscriber numbers) although TowerXchange has heard rumour about one multi-national MSP offering ESCO-like services in the market.

In spite of the challenging conditions, coverage in the market has been described as “fairly okay”. There are 33.5mnsubscribers with mobile penetration sitting at 89% (source: ATRA) and 4G coverage is available in major urban areas, where data usage continues to grow faster than expected.

In early 2018, the ATRA agreed to provide US$32.1mn of funding to deploy 250 base stations in rural and remote areas. Roshan will deploy 137 sites, Afghan Wireless 84 sites and Afghan Telecom a total of 29.


Algeria

Subscribers: 47.0mn

Tower count: 19,000

MNOs: Three

Towerco activity: Some colocations on towers belonging to national broadcaster Télédiffusion d’Algerie (TDA); Infrashare registered as a towerco in the country

Algeria has three MNOs, Mobilis (Algerie Telecom) with 41% market share, Djezzy (Optimum Telecom Algerie) with 31% and Ooredoo (Wataniya Telecom Algerie) with 27%. There are 47mn mobile connections in the country, growing at a rate of 8% YoY and mobile penetration sits at 113% (Source: ARPT – L’Autorité de Régulation de la Poste et des Télécommunications). Each of the MNOs obtained a 4G license in 2016 and rollout is well underway with around one quarter of the population covered as of Q1 2018.

There are an estimated 19,000 towers in the country of which 20% are ground based and the rest are rooftop or alternative site typologies. Mobilis has the largest portfolio with around 7500 sites, followed by Djezzy with 6,500 and Ooredoo with 5,000. State owned broadcaster, Télédiffusion d’Algerie (TDA) has approximately 350 towers. The country needs an additional 2,000-3,000 new sites to be added in the next 18-24 months, and what’s more, a significant proportion of existing sites need to be dismantled and replaced. Mobilis has long had plans to deploy 1,200 to 1,400 sites but repeated changes in management have stalled rollout plans in recent years.

Less than 2% of sites are currently shared, with many lacking the structural capacity for additional tenants and MNOs failing to agree what constitutes a fair swap. In late 2016, the regulator introduced plans for active sharing and in a short period of time, Ooredoo and Djezzy started sharing around 1,000 sites. In mid 2017 however, the regulator did a u-turn, prohibiting active sharing although provisions for active sharing are however laid out in the 4G license conditions.

No tower transactions have been carried out in the Algerian market, although Djezzy, in which VEON are major shared holders, carried out an exploratory study into a potential tower sale (VEON, formerly VimpelCom, has experience in tower divestments having previously sold their Italian towers to Cellnex and looked at the sale of their assets in Russia, Pakistan, Bangladesh and the CIS). Limits on foreign direct investment in Algeria (limiting international players to a 49% stake) however meant that there was a lack of appetite from most international towercos to enter the market. Newly established Algerian towerco, Infrashare (headed up by the former CTO of Ooredoo Algerie) keeps a keen interest in tower portfolios in the market and has financing options that enable it to abide by the FDI rules.

In terms of site operations, 99% of sites are on grid with generators used for backup on core sites. With comparably cheap fuel prices the case for hybrid solutions is reduced.

Figure four: Tower ownership in Algeria


Bahrain

Subscribers: 2.2mn

Tower count: 1,500

MNOs: Three

Towerco activity: None

The Kingdom of Bahrain has three mobile network operators; Batelco, Saudi Telecom Company owned Viva and Zain serving a subscriber base of 2.2mn (source: TRA Q2 2018).

In spite of its small landmass, Bahrain has a total of 1,500 sites of which around 12% are currently shared, leading to significant parallel infrastructure. In 2016, the Telecommunications Regulatory Authority of Bahrain (TRA) commissioned a study to examine the rationalisation of the Kingdom’s total tower count down to a core network of 400 sites. In early 2018, the TRA introduced the new Public Radio Communications Stations Regulation (PRS Regulation) to regulate the deployment of new towers and “rectify existing ones in accordance with best practice”. The new detailed legislation lays out key specifications for new and existing towers, specifying everything from the type of concrete used in the foundations to key health and safety requirements. The rectification plan is to take place over the next 15 years, with more than 90% of the towers requiring modification and the TRA setting out a goal of increasing the percentage of sites being shared from 12% to 40% in the country.

When questioned by TowerXchange on different business models to reach the targets set in place, the TRA stated “Currently there are three operators who are licenced to deploy masts and towers in Bahrain. As a result there are three different mast and towers networks, i.e. one for each operator. The Authority considers there is room for improvement by merging these different networks into one or at least two. This could be done either by introducing a towerco company, a joint venture between existing operators or other feasible business models.”


Egypt

Subscribers: 103.2mn

Tower count: 22,704

MNOs: Four

Towerco activity: HOI-MEA (plus interest expressed from a number of other towercos)

Egypt now has four MNOs (each with 4G licenses) with Telecom Egypt joining Vodafone, Etisalat and Orange after having obtained a license in 2017. With 103.2mn subscribers (source: GSMA intelligence, Q 2017) and just over 22,000 towers, Egypt has over 4,500 subscribers per tower, the highest in the MENA region.

Tower ownership is fairly evenly split amongst the three established MNOs with new market entrant, Telecom Egypt lagging behind with just 2000 towers. Four infraco licenses also having been awarded to Alkan, Mobiserve, EEC and HOI-MEA to enable them to own towers, although only HOI-MEA has built and retained a portfolio of towers with their current site count sitting at 38. Rumours had circulated that HOI-MEA were looking for a buyer for their towers.

There have been no tower transactions of scale in the market. MobiNil (now Orange) reached a deal back in 2016 to sell 2,000 of their sites to Eaton Towers for $131mn although the deal was cancelled and does not look like it will return to the table any time soon. Infrastructure sharing between the MNOs is relatively widespread, with Orange reporting that over a third of the towers they use are shared with other operators. In early 2018, Telecom Egypt reached a wholesale agreement with Vodafone to utilise its transmission and infrastructure services for a three year period whilst it establishes it network.

Each of the four MNOs were awarded an 4G license in 2016, and whilst 4G coverage is relatively extensive in Cairo, major rollout is still required elsewhere. Collectively, Orange, Vodafone and Etisalat are understood to be adding 300-500 new towers per year, whilst Telecom Egypt has initiated the next phase of their network rollout, requiring the addition of 1,000 new sites (GBTs, rooftops and IBS). Such high requirements for new build and co-locations has attracted the interest of international towercos, with American Tower, TASC Towers, Digital Bridge and Eaton Tower all being linked to potential opportunities in the market.

Grid connection for tower sites is slow and expensive and so generators are widely used, often two per site due to the high loads. Fuel remains cheap by international standards and so the case for hybrid solutions is reduced; although fuel subsidies are gradually being phased out. Orange has issued an RFP for an ESCO to take over power for a portion of their towers in the market, with a goal of improving energy efficiency at sites. At least one of the other MNOs is expected to follow in Orange’s footsteps.

Figure five: Tower ownership by Egypt’s MNOs


Iran

Subscribers: 118mn

Tower count: 36,000

MNOs: Three national plus FCP and WiMAX players

Towerco activity: Iranian Towers and Fanasia

Iran is the Middle East’s largest mobile market with 118mn subscribers. There are three national operators in the country of which MCI (Mobile Communication Company of Iran) is the largest with 61.3mn subscribers and 43% of the market share. MTN-Irancell, a joint venture in which MTN holds a 49% stake, is Iran’s second largest operator with 45.5mn subscribers and 40% of the market share; and RighTel is the third largest operator with 9.5mn subscribers and around 8-9% market share. In addition to this there are a number of FCP players and WiMAX operators who make up the balance of the market share.

There are currently around 36,000 towers in the Iranian market and with very little infrastructure sharing between the operators there is a significant degree of parallel infrastructure. In 2014, Fanasia, an Iranian company with a background as a turnkey service provider to the country’s MNOs, started their own towerco business. Their first project on Kish Island, conducted with the support of the Kish Free Zone Organisation, was to rationalise the number of towers on the island. With 110 sites on the Island, each with a single tenant and unsuitable for the addition of further tenants, Fanasia built 27 new sites which the operators were mandated to use, whilst existing sites were decommissioned. The municipality benefited from a revenue sharing model on top of the land rental fee and further benefited from the freeing up of land under the old towers. Following the success of the Kish Island project, Fanasia reached a similar agreement with the municipality of Mashhad, Iran’s second most populous city to develop a core network of 350 sites in March 2016. Fanasia currently owns 106 towers.

In early 2017, in response to the growing trend towards infrastructure sharing in Iran, a new tower company, Iranian Towers, was formed. The three shareholders in the company are MCI and Rightel, Iran’s number one and three MNOs, and Fanasia, Iran’s first towerco. The first phase of Iranian Towers’ operations will be the construction of approximately 1,000 new sites which are capable of accommodating multiple tenants. These sites will be constructed primarily in the major cities in order to accommodate 4G and 4.5G rollout. The new rollout will include both ground based and rooftop sites and will be conducted with the coordination of municipalities who will benefit from revenue sharing on the sites. Iranian Towers now own around 1,000 sites.

Figure six: Tower ownership in Iran


Iraq

Subscribers: 36.7mn

Tower count: 14,769

MNOs: Three national plus several LTE only players in Kurdistan

Towerco activity: None (although rumours circulating)

Iraq has three nationwide MNOs which own 2G and 3G licenses; Zain, Asiacell (owned by Ooredoo) and Korek Telecom (in which Orange has a stake). Zain has the largest mobile market share, with Asiacell close behind, whilst Korek Telecom is the country’s fastest growing operator which is dominant in the Kurdistan region. In addition to the three nationwide operators, there are a host of 4G LTE players in the Kurdistan region, Fastlink being the largest with Tishknet, Goran-Net and Mobitel amongst the other players. The government had proposed the introduction of a fourth national operator (in which the ruling government would have a stake) although further details are yet to emerge with political issues thought to be holding the process up.

There are 14,769 towers in the market split between the national and Kurdistan operators (figure seven). Approximately 10-15% of the country’s total stock was understood to have been destroyed or damaged during the conflict over the past three years, with power systems particularly damaged, and so major reparatory works have been underway.

There has been significant under investment in networks in recent years with 3G coverage understood to be particularly poor and so significant network expansion is required; Korek Telecom forecast that they need to build a further 2,500 sites. Major investment has been pledged by international investors and donors in a bid to rebuild Iraq’s economy, with significant funds expected to be channeled into telecoms.

Iraq’s MNOs are struggling with high OPEX, attributable in large part to security and logistics issues across the country. Power remains a major challenge and whilst figures for power availability vary by region and by time of year (ranging from zero grid to 16-18 hours in Kurdistan in summer), the vast majority of sites are reliant on two diesel generators. Hybrid solutions are yet to have any large scale trials in the country, and whilst fuel is not expensive by a global comparison, the costly and difficult logistics associated with fuel delivery and generator maintenance means that a switch to hybrid solutions is attractive.

Figure seven: Ownership of Iraq’s 14,769 towers


Jordan 

Subscribers: 11.7mn

Tower count: 6,836

MNOs: Three 

Towerco activity: TASC Towers

There are three MNOs in Jordan; Orange, Zain and Umniah (owned by Batelco) which have a roughly similar mobile market share and as such, the market is highly competitive.  There are just over 7,000 towers in the country, roughly split between the three MNOs, and towerco, TASC Towers, owns a modest portfolio of sites.

Jordan’s Telecommunications Regulatory Commission (TRC) is in the process of creating a centralised database of fibre optic networks in a bid to limit duplication of infrastructure and encourage network sharing. Whilst no such scheme currently exists for towers, infrastructure sharing does exist between the MNOs with Orange reporting that just under 15% of the sites that it uses are shared with other operators.

The telecommunications sector is subject to heavy taxes in Jordan with operators having been exposed to increased electricity prices which has had an impact on operator profits. Orange have invested in a 33.7MW solar PV plant to produce the electricity it requires.

Figure eight: MNO tower ownership in Jordan


Kuwait

Subscribers: 7.2mn

Tower count: 4,100

MNOs: Three

Towerco activity: IHS Towers (pending closure of the Zain tower deal)

There are three MNOs in the Kuwaiti market where intense price competition has driven data costs down drastically, putting pressure on the country’s operators. Decreasing ARPU has made justifying investment in rolling out new sites tough, with each MNO focussing on implementing cost optimisation initiatives.

Market leaders Zain have reached an agreement to sell 1,700 towers to IHS Towers for US$165mn. The deal is expected to close imminently, with just a couple of minor regulatory issues to be finalised. When completed, the deal will mark the first major tower transaction in the Middle East (excluding Pakistan). The entrance of a towerco will provide a more cost effective means to expand networks in a market where infrastructure sharing has been limited to date. There are approximately 4,100 towers in the Kuwaiti market with significant parallel infrastructure existing. Decommissioning is expected to play a significant role in IHS’ business model in the country.

Figure nine: Site ownership by MNOs in the Kuwaiti market 


Lebanon

Subscribers: 4.6mn

Tower count: 2,600

MNOs: Two

Towerco activity: None

There are two state owned MNOs in Lebanon, touch and Alfa, for which Zain Group and Orascom have management contracts. The two operators have a roughly equal market share in a country which has some of the highest mobile tariffs in the world. There are approximately 2,600 towers evenly split between the two operators, with no independent towercos operating in the country. Whilst subject to budget approval from the government, plans have been announced to add between 700-800 new towers before the end of 2019.

Of the 2,600 towers, approximately 15% are on good grid with 24 hours of availability, 73-75% are on poor grid (with availability ranging from 6-18 hours) and 10-12% of sites are completely off-grid. Alfa has signed an ESCO contracts with IPT PowerTech, with IPT PowerTech taking over management of the operators full portfolio of sites


Morocco

Subscribers: 43.9mn

Tower count: 19,054

MNOs: Three

Towerco activity: None although two new towercos eyeing the market

Maroc Telecom is the leading MNO in the Moroccan market with 42% market share, ahead of both Inwi (in which Zain has a 15.5% stake) and Orange in a country with 43.9mn subscribers. Data usage continues to grow as 4G rollout progresses, with Maroc Telecom reporting 4G population coverage at 93% (versus 73% in 2016).

Maroc Telecom has the largest tower portfolio with approximately 10,000 sites, whilst Orange and Inwi are understood to have 4,000-5,000 each. Infrastructure sharing between the MNOs exists, with approximately 15% of sites thought to be shared.

Figure ten: Tower ownership by Morocco’s MNOs


Oman

Subscribers: 6.9mn

Tower count: 14,000

MNOs: Two (plus resellers); entrance of third MNO imminent

Towerco activity: Oman Towers Company

Oman has two MNOs, Omantel and Ooredoo as well as two mobile resellers, Renna Mobile and Friendi Mobile. In 2017, the government introduced a tender process for a third MNO which attracted interest from parties including Zain, Saudi Telecom Company, Etisalat and Sudatel. The tender process was cancelled with the government instead deciding to award the license to a consortium involving local funds potentially led by a flagship sovereign wealth fund) and a global strategic partner. The stated objective for the change in strategy was to enable the local funds to deploy their assets in Oman as part of an overarching economic diversification vision away from oil. Details are yet to emerge of what kind of commercial model is being proposed for the consortium, similarly no official dates have been announced for when the license will be awarded.

In addition to the threat of a third MNO and existing competition from OTT players, Omantel and Ooredoo have felt further pressures from an increase in MNO royalty fees from 7% to 12% and a tax increase from 12% to 15%.

There are approximately 4500 ground based towers and 9,500 rooftop sites in the country, evenly split between the two major MNOs. Omantel are understood to be increasing their tower count by about 4-5% per annum, suggesting an average of around 100-120 new towers are built by the operator each year. For Ooredoo, similar numbers are forecast. Infrastructure sharing has been limited to date but has started to increase as the MNOs aim to execute the rollout of 4G more cost effectively, with current estimates suggesting approximately 10% of towers are shared.

In February 2018, Oman 70 Holding Company, ActivCo and the Omani Government set up a new organisation called Oman Towers Company. The company plans to build approximately 600 towers in the first five years, and has an interest in acquiring or managing the existing portfolios of Oman’s MNOs.

Rumours have surfaced that Omantel are considering the sale of their towers with a formal process expected to be announced in the coming weeks.


Pakistan

Subscribers: 147.8mn

Tower count: 34,300

MNOs: Four

Towerco activity: edotco and AWAL Telecom (plus several other licenses held)

Pakistan has four MNOs; Jazz (formed through the acquisition of Warid by VEON’s Mobilink) leads the market, followed by Telenor, China Mobile’s Zong and Ufone (in which Etisalat has a stake). With a relatively low mobile penetration rate of ~73% and a data penetration rate of ~24%, there is significant opportunity for long-term growth in the market.

Towercos have been licensed in Pakistan since 2006 but MNO attitudes towards infrastructure sharing only started to thaw in 2011, initially seeing their networks as a source of competitive advantage.

Towershare-owned Tanzanite built a portfolio of 700 sites in the market, built largely from acquisitions, with the majority of towers coming from previous WiTribe assets. The Tanzanite portfolio, 40% of which were ground based towers, secured tenancies from all major operators, reaching a tenancy ratio of 1.6x before being acquired by pan-Asian towerco, edotco Group for US$88.9mn in 2017.

edotco subsequently joined forces with Dawood Hercules, a listed Pakistani holding company conglomerate to acquire the 13,000 Jazz towers which had been carved out into a subsidiary, Deodar. The sale has however since fallen through although rumours suggest that local investors and their partners are working to rekindle the deal, albeit perhaps at a smaller scale.

Whilst several local companies are also licensed as towercos (with 14 license holders currently listed by the Pakistan Telecommunications Authority), only AWAL Telecom appears to be trading as such.

MNOs Telenor, Zong and Ufone each retain their tower portfolios. Ufone has been exploring the potential sale and leaseback of their towers in Pakistan for some time. The process was stalled by the de facto merger of PTCL and Ufone, and associated management changes, but Ufone could yet contribute over 6,000 further assets to the pool of commercially shared towers.

China Mobile’s Pakistan opco, which trades under the brand name Zong, has around 9,100 sites, of which around 2,000 are co-locations.

Telenor is a keen advocate of all forms of network sharing; towers (sharing primarily with Jazz), fibre (sharing with Zong), and has taken a lead role in exploring active infrastructure sharing. Telenor and Zong undertook Pakistan’s first RANsharing trials across around 30 sites, while the Norwegian-owned MNO has also shared IBS, both under the MORAN model where spectrum is not shared.

There has been extensive infrastructure sharing between operators but significant parallel infrastructure exists, especially in urban areas, implying that decommissioning is likely to be a key part of towerco strategy in the future. TowerXchange estimate the prevailing tenancy ratio (the average number of tenants across all towers in the country) to be around 1.25 in Pakistan, with a clear pathway to 1.5. Of around 10,000 co-locations in the country, most originate from barter arrangements, with some application of commercial lease rates, but more often offset against one another so no cash changes hands. These agreements will continue to be converted to commercial leases as towercos continue to become more prevalent.

Pakistan’s MNOs cite power as the number one operational challenge in the market, followed by security and landlord issues.

While Pakistan’s electricity grid remains unstable, and outages can last eight or more hours, the situation has improved notably in recent years. Backup diesel genset runtime is being reduced at sites on the country’s better grid connections, with DGs increasingly being removed from such sites. edotco will offer a full tower+power service in Pakistan, meaning they will lease tower and ground space as well as providing DC energy.

Figure eleven: Ownership of Pakistan’s 34,300 towers


Qatar

Subscribers: 4.4mn

Tower count: 5,000

MNOs: Two

Towerco activity: None

Qatari headquartered Ooredoo are market leaders in their home market, with 3.4mn subscribers  versus Vodafone’s 1mn. Vodafone has sold its 51% stake in its opco to former joint venture partner, Qatar Foundation, with the local opco continuing to operate under the Vodafone brand via a Partner Market agreement.

There is little to no infrastructure sharing in the market, but with both operators now effectively owned by the state the government may start to view infrastructure sharing more positively.

At the end of 2017, Ooredoo launched one of the first “5G speed experiences” at select locations in Doha. Qatar is positioning itself as a front runner in the rollout of 5G, with a world class infrastructure backbone one of the key pillars of the Qatar National Vision 2030.


Saudi Arabia

Subscribers: 43.9mn

Tower count: 35,500

MNOs: Three

Pending towerco activity: Communication Towers Co. Ltd (STC’s carve out – not yet active) plus IHS Towers (pending closure of the Zain deal)

There are three MNOs in Saudi Arabia; market leaders Saudi Telecom Company, Mobily (in which Etisalat has a 27% stake) and Zain. Additionally there are two MVNOs; Virgin Mobile and Lebara.

Between them, Saudi’s MNOs own 35,500 towers with STC having the largest portfolio. Infrastructure sharing in the Kingdom has to date been very limited, with less than 2% of sites believed to have more than one tenant. In the major cities, Riyadh and Jeddah, there has been some infrastructure sharing as part of MNO densification plans to meet growing data usage, whilst in some of the country’s holy sites where access to land is limited, infrastructure sharing has arisen out of necessity. These infrastructure sharing arrangements are typically under bilateral commercial agreements and thus far have only covered passive equipment.

With little infrastructure sharing a high degree of parallel infrastructure has developed; 95% of Zain and Mobily’s sites are reported to overlap and as such, the government is keen to promote infrastructure sharing.

Various passive infrastructure strategies have been explored by each of the Kingdom’s MNOs in recent years. As early as 2011, Saudi Telecom Company and Mobily announced their interest in forming a towerco joint venture only for talks to stall; the MNOs revisited joint venture plans in late 2016 but once again decided not to proceed.

The first talks about tower sales emerged in late 2014, when Zain appointed Citi to oversee a potential sale of their towers. Mobily followed suit announcing a tower sale process before STC also weighed in on the action hinting they too may look to sell their larger portfolio. Ultimately all tower sale processes were pulled, leaving bidders with their fingers burnt after so many stop-start discussions.

In late 2017, Zain announced that it had entered into exclusive negotiations with TASC Towers and Saudi based Acwa Group to sell their portfolio. Talks expired and Zain subsequently entered into exclusive negotiations with IHS Towers and Towershare, with the operator having previously agreed the sale of their Kuwaiti towers to the pair. On 28 November 2018, Zain announced that it had accepted an offer valued at SR2.43bn (US$647.7mn) from IHS Towers for the sale and leaseback of its portfolio of 8,100 Saudi towers, with a new build order for 1500 towers included in the deal.

In Q1 2018, Saudi Telecom Company established Communication Towers Co. Ltd., a fully owned limited liability company, with a share capital of SR 200 million which “will be responsible for owning, constructing, operating, leasing and commercialising telecom towers.” The vast majority of Saudi Telecom Company’s 16,400 towers will be transferred into the entity which is yet to start commercial operations, awaiting the necessary licenses from the relevant authorities. STC issued an RFP for a towerco management partner, but with the operator reluctant to give up an entity in the towerco venture, interest from the international tower community was limited.

Market intel suggests that there has been movement in recent weeks in CITC’s discussions regarding towerco licenses, with such developments expected to spur progress with the Zain tower sale and Communication Towers commencement of operations.

 

Figure twelve: Tower ownership by Saudi Arabia’s MNOs


Tunisia

Subscribers: 14.2mn

Tower count: 8,383

MNOs: Three plus Lycamobile

Towerco activity: NATIC and Infrashare (newly formed towercos)

There are 14.2mn active subscribers (source: INTT Q1 2018) and three MNOs in the Tunisian market; market leader Ooredoo, Orange and Tunisie Telecom. Emirates International Telecommunications (which has a stake in UAE operator du) recently reached an agreement to sell its stake in Tunisie Telecom to private equity firm, Abraaj Group. Rumours had circulated that the transaction may precipitate a sale of Tunisie Telecom’s towers, and whilst the takeover has since been called off, leaving the fate of Tunisie Telecom’s towers in the balance, observers expect a tower deal to occur in the future.

There are an estimated 8,383 towers in the Tunisian market, split between the region’s MNOs. In addition, there are two new towercos eyeing up the market, NATIC and Infrashare. Whilst NATIC has an appetite for build to suit (which is understood to be somewhat limited in the country), Infrashare’s interest relates more to sale and leaseback activity should it arise. When it comes to major infrastructure projects, the government has instigated limitations on foreign direct investment, limiting international participation to 49% Such legislation is expected to be extended to towers in the country, although forthcoming elections may shake things up once again.

Infrastructure sharing exists with Orange reporting that approximately a third of its sites are shared with other MNOs. In addition to passive infrastructure sharing, Tunisie Telecom and Ooredoo have a RANsharing deal in the country into which there had initially been discussions to include Orange.

Figure thirteen: Tower ownership by Tunisia’s MNOs


UAE

Subscribers: 19.0mn

Tower count: 13,000

MNOs: Two

Towerco activity: None

Etisalat lead the UAE’s market where it competes with du (and new MVNO, Virgin Mobile). Emirates International Telecommunications (which has just sold its stake in Tunisie Telecom) is a shareholder in both du and Virgin Mobile in the country.

Whilst two competing entities, both Etisalat and du have a common shareholder in Emirates Investment Authority which has 60% share in the former and a 39.5% share in the latter which creates an unusual situation in the market. The two operators have a fixed network sharing deal.

There are an estimated 13,000 towers in the UAE of which Etisalat owns 8,000.

The country is very much positioning itself to be a front runner when it comes to 5G.

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