The trend of telecom operators separating their tower businesses into standalone companies could open an opportunity for new entrants to the market and will enable mobile companies to focus on higher-margin business.
Research firm Mordor Intelligence says there are about 25,767 towers in SA, serving 97-million SIM cards, making it one of Africa’s best-covered markets.
In SA, where telecoms infrastructure has been shared, the trend of selling part or all of the tower and masts businesses is only gaining momentum now, though Cell C sold its tower assets to American Tower Company in 2011.
In countries such as Nigeria and Ghana, mobile network operators wanting to raise money, reduce the cost of running such infrastructure and focus on providing services to clients, have sold towers for almost a decade.
In SA, mobile companies are now transforming their businesses to focus on higher margin value-added services.
This week Vodacom, which is transitioning to a technology company that will offer digital services and an online marketplace, said it will create a standalone business that will house its tower assets by March next year.
Vodacom’s aim is to give its tower company business more focus and “see if we can increase tenancy”, CEO Shameel Joosub said after the release of the group's results for the six months to September. He said the company will not sell the assets but could enter into partnerships.
Keoikantse Marungwana, senior research and consulting manager for IDC Sub-Saharan Africa, said separating the tower assets will allow Vodacom to compete directly and fairly independently with other tower companies, and enable it to innovate on its business model.
“There are many opportunities here beyond the traditional TowerCo business. It will certainly attract new and innovative players who can use the towers and base station infrastructure, and this includes non-telco partners that have an interest in the base station’s hosting environment, particularly, for 5G and EDGE computing.”
Marungwana said traditional barriers to entry into tower infrastructure — including expensive network hardware and software, prohibitive spectrum auctions and complex skills requirements — are rapidly falling away. The selling or separating of tower businesses “creates a huge opportunity for new players to launch innovative business models for telco services with much lower investment requirements compared to when the incumbent telcos started several decades ago”.
Telkom plans to list its masts and tower business, Swiftnet, next year. About 56% of Telkom's customers use Swiftnet's infrastructure and the group is looking to grow the business further.
It will
— Shameel Joosub
attract
new and
innovative players
who can use the
towers
Vodacom CEO
MTN SA has entered into a sale and lease-back agreement for its 5,709 towers with IHS Towers. MTN said this week the transaction aims to ensure a limited financial impact on the local company’s current running cost versus leaseback costs and improved network performance.
Dobek Pater, director for business development at Africa Analysis, said that to maximise shareholder value it is better to separate tower operations. With active infrastructure such as radio networks, used for roaming, also being increasingly shared in the South African market it will become the standard model in future.
“We are likely to see a greater segmentation of the mobile/wireless market into wholesale and retail services, and more retail service providers buying wholesale service from active infrastructure providers to resell them to their customers,” said Pater.
As it focuses on growing its value-added services to offset the decline in voice revenues, Vodacom is ramping up its digital platforms into a one-stop shop for fintech, e-commerce, and enabling payments for small to medium enterprises. It is also using its technology to enhance activities in areas such as farming.
Last week it announced a fibreoptic business that it is establishing with Vumatel and Dark Fibre Africa that will become the biggest fibre-to-the-home and business infrastructure group in the country.
Vodacom recently launched a super app called VodaPay, described as a digital mall and digital wallet that enables users to pay bills, send money, buy prepaid products, food and goods from a variety of fast-food and retail companies. Vodacom will also introduce loans and savings on the platform.
“The app is a game changer,” said Joosub, and the company intends to “ to scale each of these new revenue streams into formidable businesses”.
Marungwana said there is a huge appetite in the market for many emerging technologies, including artificial intelligence, 5G, augmented reality and virtual reality. Customers are looking for partners who can provide these technologies.
He said operators have realised the enormous opportunity for creating additional value for the millions of consumers who rely on communications services for their lifestyles and livelihoods.
“Telcos have chosen to stop being mere spectators and facilitators of these constant and enormous value exchanges. They are now becoming the providers for the full suite of digital services that customers interact with daily in their lives.
“The smartphone is an extremely powerful portal into our lives and hosts all data and information about consumers’ needs, wants and aspirations. People want this convenience that smartphones provide, and operators who can become one-stop shops for these digital experiences will build long-term and immersive experiences for their customers, and this will reflect in accelerated growth of their noncore services revenues,” Marungwana said.
