What are Asia’s most appealing tower markets in 2020?

TowerXchange explores the latest trends, dynamics and M&A outlook across the continent’s hotspots

Read this article to learn:

  • Asia’s most active markets and main business opportunities
  • The new tower markets in Asia: Bangladesh and Philippines
  • Where will we see growth across the region’s more mature industries?

For the last few months, Asia has been one of the world’s most active telecom infrastructure markets in terms of regulatory updates, M&A announcements and technology innovation. From DICT’s push in the Philippines to consolidation in India, towercos, MNOs and investors have been very active despite the pandemic. With IGT’s and Optus sales on the horizon, the first towerco rollouts in Bangladesh and the Philippines and plenty of growth across Indonesia, India and Myanmar, the next couple of quarters are going to reshape the region’s tower industry. After months of research and  countless calls with the Asia’s leading TMT executives, TowerXchange brings you a sneak peak of the regional industry ahead of the 7th TowerXchange Meetup Asia taking place virtually next December.

Bangladesh

After years of legal disputes, regulatory hurdles and no organic growth, Bangladesh’s tower market is finally moving in the right direction.

Back in March, the Bangladesh Telecommunication Regulatory Commission (BTRC) finalised the long-awaited Service-Level Agreement (SLA) that enables licensed towercos to start operating in the country by providing firm guidelines on how MNOs and their infrastructure counterparties should engage commercially.

Most importantly, MNOs won’t be able to rollout their own towers hence towercos are their only deployment option. Until this year, edotco was the only towerco effectively operational in the country. Since March, the other three licensed towercos – Summit Towers Limited, Kirtonkhola Tower Bangladesh Ltd and HighTech Consortium Ltd – have been in conversations with some of the MNOs, who are keen to diversify their rollout partners. Further, Grameenphone and Rubi were not able to import any equipment for their network rollout due an ongoing lawsuit, but that restriction has been now lifted and both telcos are expected to restart ordering BTS imminently. American Tower has formalised its joint venture with local player Kirtonkhola, and we have learned that at least two of the towercos have already agreed commercial terms with one of the MNOs for a considerable BTS order following the approval of the SLA. Now, the others should follow.

With a clearer regulatory regime and a huge need for densification (as nobody has built any sites for the last 24 months), we can expect many greenfield sites to be rolled out in the country over the next year. Specifically, towercos expect lots of activity in urban areas, with many rooftop sites and a good number of macro towers already in the pipeline.

In the past, both VEON and Grameenphone explored monetisation opportunities for their sites in Bangladesh. Now, with a more favourable regulation and telcos investing big on their rollout, we could see some towers sales.

Indonesia

Indonesia is hot – no surprise here. Indonesia has been one of the most prolific tower markets in terms of growth and M&A activity in Asia. The year started with very good levels of organic growth through many BTS orders, driven mostly by 4G expansions and the MNOs’ ambitions to compete with Telkomsel outside of Java. Protelindo and Centratama acquired 1,728 and 1,050 towers from XL Axiata respectively, with the MNO reinvesting a substantial part of that capital on its ex-java aggressive rollout. Indosat Ooredoo, who also sold 3,700 sites to Protelindo and Mitratel back in December, has also been deploying quite aggressively in a few cities in Java. Ooredoo is currently exploring different options for its global tower portfolio and it will be interesting to see what happens with Indosat’s remaining 3,000 sites, as the MNOs doesn’t seem to have any financial pressure nor a cash need at the moment. Hutch, also in very good financial shape despite COVID-19, is also expected to continue investing in 4G deployment nationwide.

In response to that 4G development and following Protelindo’s lead – who has now a fibre portfolio of over 30,000km – many towercos are fiberising their sites to meet their customers demands. Based on RBC Capital Markets’ Tower and Mobile Infrastructure Recap, the percentage of BTS towers built with fiber connectivity this year is 60-70% vs 10% in 2019.

Now, the MNO monetisation wave continues as Telkomsel has just announced the sale of 6,050 to sister company Mitratel for US$700mn. The companies, who are owned by state operator PT Telekomunikasi Indonesia Tbk (Telkom), are entering a sale and purchase agreement, which will increase Mitratel’s portfolio to over 22,000 sites.  The move follows Telkom’s plans to consolidate all its tower operations under Mitratel ahead of the company’s upcoming initial public offering (IPO).

Although there have been no updates on the potential lift of telecom infrastructure from the negative investment list, international investors are keeping an eye on the country’s tower industry. Carlyle Group has been in conversations with different local and global funds about a potential sale of its stake on PT Solusi Tunas Pratama TBK (STP) for years and TowerXchange has learned that Centratama, one of the biggest indoor solutions providers in the market, has also solicited some bids to foreign funds. Moreover, IBS, one of the country’s “big four” publicly traded independent towercos, is also considering a sale. With all those profitable and large portfolios on the storefront and pending the inevitable (but unpredictable) lift of the negative investment list, Indonesia is one of the most prolific markets in Asia and will become arguably Asia’s top destination for global tower leaders once the restrictions are over.

Myanmar

It is not a secret; Myanmar’s largest towerco Irrawaddy Green Towers (IGT) is up for sale, a deal that is going to reshape one of the most dynamic tower markets in the region. Malaysia’s telecom giant Axiata Group has been shortlisted—on an acquisition that would make edotco the largest tower firm in the country—and Guodong Group of China as well as private equity firm CVC Capital Partners have also expressed an interest on the transaction, that could be value at around US$800mn. While the details of the deal are still under discussion, Myanmar will continue offering positive levels of organic growth and collocation as well as a lot of operational opportunities (and headaches) for towercos. The country’s telco landscape, one of the less affected by the pandemic across Asia, has remained very strong, with MNOs’ ARPUS going up and the lockdown driving data growth exponentially, which ultimately has pushed telcos to expand both coverage and capacity on a market where over 80% of the consumer demand comes from data. Densification has been a priority, increasing the need of more sites, while the country still holds many opportunities for geographical coverage in remote areas where MNOs are currently expanding.

On the M&A front and beyond IGT’s expected transaction, there are plenty of consolidation opportunities through the acquisition of local developers and middle market towercos. Mytel’s entrance drove the creation of dozens of towercos that developed one-tenant sites that can now be upgrade and market to other MNOs. Viettel’s subsidiary has already overtaken Ooredoo in number of sites and is now catching up with Telenor in both number of sites and subscribers, hence MNO competition will continue driving growth as telcos expand their 4G capabilities.

Towercos continue exploring alternative energy strategies and business models to reduce fuel dependence and cost and TowerXchange has learned that some players are now offering a flat rate tower rental that includes power cost, which pushes infrastructure providers to minimise fuel use. Solar energy deployment is getting bigger so creative micro grids providers and ESCOs will find plenty of business, especially in the country’s remote areas.

Further, the country will hold its first democratic election in November, which is expected to open the nation a little bit more to international investment.

The Philippines

Yes, the Philippines are Southeast Asia’s eternal tower promise, but we are finally seeing some action and very promising signs both on the commercial and regulatory fronts, with COVID-19 accelerating some necessary changes. In May, the Department of Information and Communications Technology (DICT) issued the Circular No. 8 s., providing the guidelines for co-location and sharing of passive telecommunications infrastructure.  The policy allows tower companies and interested parties to register directly online without entering MOUs or MOAs and the executive is pushing MNOs to engage with towercos more than ever.

On the tower permitting side, the government has also issued a Joint Memorandum Circular (JMC) signed by the DICT and other agencies to expedite and streamline the processing of common tower permits to a matter of days.

In the meantime, all three MNOs are going ahead with their rollout plans and already engaging with towercos commercially. Although with considerable delays due the pandemic, new entrant DITO is already building some sites independently and through turnkey providers, local developers and vendors. Now, a number of local press reports stated that DITO has signed an agreement with Udenna Infrastructure Corp (UIC) – owned by Udenna, one of the new MNO’s major shareholders – to carry out part of its rollout. Different outlets suggest that UIC will build 1,500 sites and over 1,400 km of fibre optic over the next couple of years.

The incumbent Globe and PLDT have already signed some commercial agreements with the main towercos and their rollout should start imminently, expecting a considerable push over the next few months when the tower policy is officially out.

Looking beyond: what about Asia’s most mature markets?

India, which could be considered a region of its own due its idiosyncrasy, volume and complexity, is going to be one of the markets to watch over the next few months after some positive developments. In fact, it has always been.

Brookfield’s entrance and Indus Towers and Bharti Infratel’s merger are going to bring two new powerful consolidators. In addition, Airtel and Vodafone Idea have been granted 10 years to repay their AGR dues, which should relief some financial pressure from their balance sheets, allowing both MNOs to continue investing on their rollouts.

Bharti, Indus and other market leaders will continue exploring new streams and synergies beyond MNOs. Small cells are finally picking up in India in both urban areas and suburbs. There has been a considerable growth around IBS as well as new partnerships between towercos industrial enterprises and government bodies around Wi-Fi hotspots, IoT solutions and more. FFTH is also gaining momentum in India and many towercos are fibrerising their assets, with industry sources anticipating around 20% of future incomes coming from non-towers assets in the near-term.

Earlier this year, Singtel’s announcement of its intention to sell Optus’ towers brought Australia back to the APAC tower spotlight. The portfolio, with a value of around US$1.2bn, has caught the attention of local and international towercos and investors. Further, it looks like Telstra is finally going ahead with its carve out and with 5G underway, growth is guaranteed.

Over the last six years, the region’s leading telecom infrastructure executives have come together at the Marina Bay Sands in Singapore to network and discuss trends and business opportunities across the continent. Unfortunately, we won’t be able to have a drink in front of one of the world’s most iconic skylines, but TowerXchange’s community will gather virtually on December 8-9 for two days of discussions and business meetings at the 7th TowerXchange Meetup Asia. American Tower, Axicom, Protelindo, IGT, AP Towers, Indosat Ooredoo, Teletalk, Kirtonkhola Tower Bangladesh and more will be discussing opportunities and challenges across all the above markets and beyond. Will you be joining us in a few weeks?

 

 

 

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