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Tower sharing could shift the mobile landscape

Cambodia’s telecom market is becoming overcrowded, making mobile tower sharing increasingly more attractive for operators.
Cambodia’s telecom market is becoming overcrowded, making mobile tower sharing increasingly more attractive for operators. Hong Menea

Tower sharing could shift the mobile landscape

Infrastructure-sharing firms are helping mobile network operators cut network roll-out costs and focus on their competitive strengths while reducing the clutter of telecom equipment.

The mobile towers that cap buildings and rise over villages make up the bulk of a mobile operator’s capital investments, and a large part of its ongoing operating costs. So as telcos expand their network coverage, deploy new technologies and respond to rapid data growth by adding cell sites, the argument for sharing infrastructure is gaining traction.

In developed markets, the major mobile network operators have sold or spun off their tower operations and instead rent tower space from other operators or independent tower companies (towercos).

By sharing passive infrastructure, they can drastically reduce capital costs and improve margins.

Suresh Sidhu, CEO of Edotco Group, a subsidiary of Malaysian telecommunication giant Axiata that operates 17,000 towers in six Asian countries, said the basic business model is quite simple: towercos take care of tower capital costs and maintenance, offering cost efficiencies to attract operators and maximising their profits by signing on more tenants.

He explained that Edotco typically invests up to $100,000 to build a tower then charges mobile network operators a rental fee to place their base station equipment and antenna on it. Alternatively, it may purchase existing towers from an operator, upgrade them and then lease them back to the operator while allowing others parties to add equipment.

“All operators share the benefits of more than one party on the tower,” he said. “So if we bring a second operator, we can offer both parties a slightly better price than if there was just one tenant.”

Tower sharing is fast becoming the global industry norm. In Asia, nearly 80 percent of the total inventory of towers and investible rooftops is now owned by towercos.

In Cambodia’s crowded telecom market, where six operators vie for a slice of a relatively small pie, redundancy is increasingly obvious. The Kingdom bristles with towers – some 10,000 of them in all. In Phnom Penh, a small city block can contain up to five individual mobile towers, with operators forced to put up additional masts as rising data usage shrinks cell sites and ongoing building construction blocks line-of-sight arrangements.

“Infill, where we have to put up an additional site where one did not exist before, is one of the major drivers for Cambodia,” said Sidhu. “Over the next 10 years you could conceivably see a doubling of locations – and that’s relatively modest growth, per se.”

Edotco already operates 1,958 towers in Cambodia – most of them inherited from Axiata’s local mobile network operator, Smart, and provides managed services for about 1,000 more. The towerco erected its first 200 new towers last year and plans to build another 600 in the next three years.

While some local mobile operators may be reluctant to rent tower space from Edotco given its affiliation with Smart, the towerco’s profitability will ultimately depend on its commercial neutrality, ensuring that its towers are open to all operators – even Smart’s rivals – and with no favouritism in rental fees.

Ultimately, higher tenancy will yield higher profits, and push the focus of mobile network competition away from signal coverage and toward the innovative technologies and customer service that operators provide to their customers.

Phillip Wong, managing director of Edotco Cambodia, would not disclose the exact mix of operators that use Edotco’s tower network, but said “nearly all” are customers, though rental patterns differ according to their needs.

He said the tower-sharing model is particularly useful for new mobile network operators that need to roll out a network quickly.

“Tower sharing reduces the barriers to entry for new operators, as it removes the need to build a network of towers from scratch,” Wong explained. “This reduction of cost is substantial and can reduce typical network roll-out costs by as much as 60 percent.”

It also helps established operators reduce costs when infilling urban areas or extending 4G coverage to off-grid rural areas where operating costs are higher and revenue generation lower.

“For established operators, tower sharing helps to reduce the overall cost of network operations and helps them to achieve market coverage effectively and at speed,” Wong said. “Operators can also avoid duplicating costs while extracting the maximum benefits from scarce resources.”

Cheryl Gray, brand director of Cellcard, which boasts the second-largest tower network in the country after Metfone, said the company is investing heavily in its tower portfolio “to escalate the availability of 4G across all of Cambodia [in order] to provide affordable and fast access to mobile data for all.”

Cellcard currently has more than 2,200 towers, with plans to add an additional 500. While Gray confirmed some of these towers were rentals from Edotco, she said details on the number and placement of shared towers could not be disclosed.

Viettel, the Vietnamese military-owned telecom that operates Metfone, could be a harder sell. Even before its acquisition of Beeline in 2015 it had the country’s largest tower network. The company is expected to offload some of its duplicate assets before investing in additional sites.

Whereas Edotco is building a tower empire across Asia, Camtowerlink Communication, a local subsidiary of Malaysian IT firm MutiaraTeknologiSdnBhd, has positioned itself as more of a boutique operation. The company provides services such as tower deployment, cellular on wheels (COW) and BTS hotels.

Under an agreement inked last year with the Apsara Authority, Camtowerlink has installed six camouflaged mobile towers inside the Angkor Archaeological Park near Siem Reap, allowing visitors to use their mobile phones for the first time when visiting Angkor Wat.

Youssef Zamri, CEO of Camtowerlink, said the “Big Three” mobile operators – Smart, Viettel and Cellcard – as well as newcomer Seatel, have rented space on the towers.

“Some operators have rented four towers, some have five, but all six towers are occupied,” he said.

The cost of erecting towers “depends on the height and soil quality,” Zamri said, explaining that higher towers use more steel, while soft soil requires more pilings. Towers under 20 metres cost about $25,000 to construct, while the extra framework needed to reach heights of 75 metres can push costs north of $100,000.

High tenancy will help Camtowerlink recover these costs over a relatively short payback period.

Zamri declined to disclose the rental formula for tower space, but said the rental fee falls – and the company’s margins rise – as more operators come on board.

“Typically, the business model is to attract all operators and having more tenants can reduce the rental rate,” he said. “The more tenants, the more each individual can enjoy a lower rate.”

Camtowerlink is currently in discussions with mobile operators and the Apsara Authority. If approved, an additional two dozen or more towers could eventually extend mobile network coverage throughout the 163-hectare historic park.

The company also recently secured a contract to install and manage shared towers at the international airports in Phnom Penh and Siem Reap – high-value territory contested by all six network operators.

While commercial considerations are driving tower sharing in Cambodia, in many countries, respective governments have mandated the practice to reduce the amount of telecom equipment cluttering the skyline.

A draft of Cambodia’s telecommunications law had prohibited telecoms that operate infrastructure assets from providing retail services. This would have required the major operators to sell off their tower networks and rely on towercos or government-run cell sites. However, the article did not make it into the final legislation, leaving network infrastructure strategy up to the operator.


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