Infrastructure Sharing: Operators selling to IHS, Helios, Eaton, American Tower Company

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infrastructure-sharing-zimbWhen I decided to prefix the title of this article with “Infrastructure sharing:”, I realised it would make some readers protest that this is technically wrong as it’s not strictly a form of infrastructure sharing. So, Infrastructure as a Service? As correct as it feels it’s also an abuse of something else. But then again, active telecoms infrastructure is now increasingly getting virtualised, so much it will itself become passive. So IaaS is closer to this than it looks right now.

The point of this post is not to argue definitions of sharing. Sharing is just an ongoing discussion in Zimbabwe right now. The current mode, of everyone building their own passive infrastructure is not efficient. Passive infrastructure costs are things like building roads to towers in remote areas, the base station towers, base station power generators, keeping these fueled, trenching for fibre, laying ducts for fibre and all other civil work and materials that go into having a live network.

It’s the typical stuff that, ideally, a mobile network operator would rather someone else focused on so that they’d just focus on creating stuff like EcoCash, the Facebook Bundles, Telecare and so on. Unless, like POTRAZ asked yesterday (and some agreed with), network coverage alone is a point of competition in Zimbabwe right now which would mean the market hasn’t matured enough to compete on innovative models/marketing ideas etc…

The general feeling from most local operators though, from what we could gather yesterday at least, is that a third party infrastructure company that would ideally build its own infrastructure as well as buy existing infrastructure from current providers, would be the best solution. Such a company wouldn’t have qualms about building in redundant capacity in the hopes of selling it to providers in future. They’d have it inbuilt in their model to forecast uptake, prepare for it, and factor it well into their pricing and still manage to keep it attractive to their customers (the operators)

Learning this morning therefore that in Zambia and Rwanda, Airtel has just concluded the sell of its tower assets to an infrastructure company called IHS Holdings, was welcome as proof of model. Not that the model hasn’t been proven in other parts of the continent. In November, Airtel itself sold 4,800 towers in Nigeria to American Tower Company. In September, Airtel sold some 3,500 towers to another infrastructure company called Eaton Towers. And then earlier in July, sold some to Helios Towers. It’s not just Airtel – Orange in Uganda has also gone for the model too. So has Kenyan operators, Nigerian operators and more.

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There’s clearly no shortage of Tower companies looking to expand on the continent. And no shortage of Zimbabweans working in high positions at such companies too! There’s of course the indigenisation position to be clear about before such companies are interested in investing in Zimbabwe. The flip side is that there’s also no shortage of “normal-government countries” to work in for investors.

Event if there was competition on infrastructure, the operators themselves (including Econet) have said that managing base stations is a pain. They have also said that dealing with local authorities to get the required permissions to do stuff on the ground is very slow and painful. What better solution than to hand this over to a company whose whole point of existence is dealing with such pains, and has therefore adapted to a point they thrive in the face of what seem like huge pains to regular telecoms operators?

10 Comments

  1. Glonass says:

    Dear Writer why should we be selling our towers to foreign companies unless I missed the point somewhere. I thought you would pitch your article more on promoting Local heavy engineering and construction Firms in the Likes of Gulliver, Tower Construction, etc to venture into this business model and to buy those already standing towers. We said we want indigenisation of our resources so this is the opportunity. Mr author Our Telecommunications laws state that no foreigner can own a majority stake in our telecoms companies and this law should also carry through to IaaS. You can not tell me that you want us to to bring in foreigners for such simple things as building and maintaining towers? Thats absurd

    1. Didn’t mean external companies in the “bring in foreign steel bars sense”. Meant the “bring in foreign money” sense. In other terms, investment. Sorry it didn’t come out clearly. A law that ensures the country getting the investment also benefits economically is good. Such a law should be consistent in presentation and application.

      1. Glonass says:

        Ok what I meant was we need local business people, local engineers to buy into this so that our Economy is not bleeding money paying out foreign dividends. Trust me I have nothing against foreigners but I can tell you that its not a stroll in the park for a Zimbabwean Company to buy assets in USA why should it be easy for them. In the end we end up with nothing. If we sell these toweres to foreigners they will bring their own people and we are the ones who will be singing the blues with over 90% unemployment. What I am driving at is the fact that we have thousands of engineering graduates out there who know about these things let them jump in or be absorbed by our local Engineering companies and lets see indigenisation come to the fore front tione. But while promoting local investment and participation there will be need for heavy handed monitoring and regulation because when regulation slackens as is the norm in Africa mediocrity rears its head. And because these towers if not properly constructed can be a hazard to citizens thats why I say there is need for heavy handed regulation so that there is no slackening otherwise it won’t be long before they start building our own versions of the Leaning Towers of Zimbabwe

        1. Is it not a good thing for foreign companies to invest in Zimbabwe?

          1. tinm@n says:

            I think its good, but given the NSA leaks, that have somehow flown over your heads, for communication, one would rather have something local to handle the infrastructure.

  2. mwana wevhu says:

    this is not foreign companies investing in Zimbabwe, the skill pool would not be from here or directly and indirectly be from here even if when they buy the towers they get the employees as well. Soon they would be released and because of Managed Services, you will have engineers running this new network from India or the U.S . Then there is the revenue which would be lost as the monies would flow to where the parent company resides, and you want to call that foreign companies investing in Zimbabwe? Does that do indirectly contribute to countries cash in circulation and all that economic stuff we do not fully understand.

    I fully agree with Glonass, with his contribution and i would support a domestic plan to do this, and why should we look at countries where the main operators are already foreign owned : Airtel for Zambia is from India, Orange for Uganda is from France, MTN for Nigeria is from South Africa and MTN has not done this yet in its home country, Safaricom in Kenya is majority owned if not also founded by Vodafone which is from the U.K. And then we look at Zimbabwe : Econet for Zimbabwe is from Zimbabwe , Telecel for Zimbabwe (Telecel was originally started by Miko Rwayitare in then Zaire) is majority owned by Vimpcel/Orascom Russia/Egypt (and even that is changing by the day), Netone is from Zimbabwe and is state owned. Out of the countries mentioned as examples, only Nigeria stands out as Globacom is a Nigerian company that seems to be doing well in its home market and the other countries it operates in.
    So are you PROTRAZ just doing a copy/paste solution for our market and assume if it worked for them it will work for us? Or have you done your home work on this or are trying to make it look like you are indeed working. Sorry for sounding angry though this could have been done sooner before fiber had been used in base stations, unless you are trying to erase competitive advantage in order to level the playing field, if so please show us how as consumers this will benefit us otherwise we might just use our airtime money to start a company that will do this and say No to foreign ownership, Africa is known as the last frontier and we might just allow them to Own us again if we do not ask the right questions, and watch our actions.

  3. trez says:

    This article seem to have some facts correct. The business model is complex than most people would imagine. Sharing of infrastructure is not limited to your mobile operators but extends to your ZTv, ZFm, Africom etc. I have had an opportunity to work with one of the companies. This is big business, too big to be run by our small boys. It needs lots of money to start up, moreover huge working capital. Profits are only realized years, I mean many years 7/8. I am digressing here. The real issue is not about jobs created, it’s all about giving the best to all consumers. These companies are not run by engineers but by normal operational staff, MD, Marketing, finance, hr and of course technical people. The fact that operators are finding it tough to run simply shows the need for a specialized service.

    1. Glonass says:

      Yes you are correct but you also need to read the Broadcasting Act of Zimbabwe in terms of Signal Carriers. It does not say Infrastructure Owners can be signal carriers it says Only Telecoms Company or A Licensed signal carrier can be a Signal carrier. So the issue of broadcasting will still come back to the likes of Econet NetOne Telecel Transmedia etc. If this becomes law will they also strip Transmedia and NRZ of their towers? You see we Zimbabweans should stop this habit of saying “this is not a small boys business” yes It is not but how is Econet a Big boy on the African continent and beyond. Lets stop thinking everything American or European is best for us lets cut out our own trends not to wait and copy paste what others have done. If its not a small boys business so Im sure there are Big Boys in Zimbabwe who can ake this up. It wont be surprising that you will find the likes of Econet NetOne Telecel and all the other smaller telecoms companies pooling resources together and giving birth to an entity specifically for that and shares distributed on basis of assets an company brings to the table. If that happens I would be more happier as long as we manage our infrastructure and create the jobs we need.yes there would be need for other departments in the likes of HR, Marketing, Finance and all just like any other company. There is nothing special about these towers anyway its simple civil engineering. WE ZIMBABWEANS can do who has been building those towers for the last 18 years?

      1. trez says:

        NO!! They do not even need to strip Transmedia and or NRZ of their infrastructure. My argument is the sharing of infrastructure shouldn’t be an issue that needs legislation. I would assume once its a legal issue, this would compel me as an infrastructure owner to share against my will. That model cannot work. But say an independent private company comes in, voluntarily, it is their singular duty to convince all infrastructure owners to share because of certain benefits they as asset owner stand to enjoy. Econet might refuse to share some of its infrastructure which in the long run becomes their problem. The models i know of do not guarantee infrastructure owners to sell all of their infrastructure to infrastructure sharing operators like ATC. I repeat “this is not a small boys business”!!! Econet managed to do this because they had huge access to foreign markets which made it easy for them to raise capital. That is why Netone, Africom and many other home grown companies have failed to grow big fast the Econet way. Everyone knows the Econet story so i wont dwell on that. I do not share your “simplistic thinking” (pun unintended). Civil engineering is only but another part of the business. If you get a chance to see it from the inside how these companies, ATC, Eaton etc get to do it, you will appreciate it a lot more. They go to the same markets like Econet still does to raise capital in London, Hong Kong and New York. We dont have that kind of capital in our local markets.

  4. nhopi says:

    If I may humbly contribute my 2 cents worth.

    As a start, perhaps Mr Writer should leave out the analysis of “is foreign investment good for Zimbabwe or

    not?”, as that topic requires a website on its own, not a posting. Lets keep to the digestable topic at hand, which is IaaS.

    On the “simplistic view”, I also prefer Occam’s Razor, like Glonass, and take the position that IaaS is a business as any other business. There will certainly be some functions or business arrangements that are unique to this specific industry, in the same way that an offtake arrangment on a piggery will differ from one in a biomedical cloning business.

    Trez, the argument that the business would be run by “small boys”, Glonass (ref Econet) and Kabweza (ref Norman Moyo) made the point sufficiently. I think it is important that we disabuse ourselves of the belief there is no capital in Zimbabwe. Lets not get tangled up in arguments about sophistication of stock-exchanges, tradable financial instruments etc. There is capital that can be leveraged, otherwise we would not be having all these companies investing in the country. Remember an investor only puts his dollar on the table when he expects to get back more than a dollar. A more valid argument would be that the country suffers from cash flow constraints e.g. needing $5000 to buy a car when you only earn $500 per month, but will definitely have the full $5000 in ten months. This is a different argument, one the solution to which can be debated on.

    Mwana Wevhu, fibre optic network owner, I hear you

    argument: the pain of having dreamed up and implemented a fibre solution before everybody else has removed maranga from their eyes, only to be told you have to “share” your catch of the day. Thats one way of looking at it. The other way of looking at it is this: you will not have to go every morning to set your traps, you take turns with others, which gives you a chance to enjoy your morning bliss. This is obviously not the best illustration of the concept of economies of scale, but what happens in sharing is that access is not give for free: owner of infrastructure gets paid (maybe cost plus profit, depending on how they structure and negotiate the

    agreement). This thus works to the advantage of the owner of the optic cable, as the volume of chargeable transactions more or less doubles in the case of Zim mobile infrastructure, meaning you get your money back in half the time it would take you to do that on your own. From the perspective of an investor you should welcome this with open arms. Unless of course your infrastructure is the source of your competitive advantage, which always leads to your downfall (fixed land lines anyone?). Not forgeting the customer, the sharing scenario means the customer also pays less. The last time I looked at telecommunications the price elasticity of demand for communication services was more than one, meaning a reduction in price of 1 cent will result in revenue increases of more than 1 cent. This current set up where we have three times as much infrastructure going towards the same customer can only compromise both the service provider and the customer. So my brother/comrade; we need to look beyond the limited business models that we have been taught to use, and start making real money.

    Infrastructure sharing ndizvo!

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