Telecom infrastructure sharing offers high potential for telecom operators as it helps optimise investments and improve margins allowing them to focus on addressing increasing service demand. Countries in Southeast Asia, such as Indonesia, Cambodia, Myanmar, Malaysia, the Philippines, Singapore, etc., have been adopting this practice of sharing/leasing towers in order to optimise costs while expanding their network. A look at how telecom infrastructure sharing has evolved in some of the Southeast Asian markets and how it is expected to progress going forward…

Indonesia

Indonesia has one of the most mature tower markets in the world, with high tenancy ratios and strong market caps. The country had approximately 91,728 towers at the end of 2017, according to a recent report. The tower market is dominated by three major tower companies, namely, Protelindo, Tower Bersama and STP. Other players such as IBS Tower, KIN, Balitower, Centratama Telekomunikasi and Persada Sokka Tama also own towers in the country. Telecom service providers – Telkom, Telkomsel, Indosat and XL – also have a significant tower footprint.

The tenancy ratio for Protelindo was 1.68 in the fourth quarter of 2017 and Tower Bersama had an even higher ratio of 1.71 during the same period. Tower companies in the country typically add 3,000 to 5,000 towers (ground based, rooftops and infill sites) and about 0.13 tenancies per tower during a year. Towercos also offer fibre, microcell poles, IBS and nano-sites along with traditional ground-based towers.

The tower market in Indonesia has seen rapid consolidation and new entrants in the recent past. Protelindo recently entered into a deal with Providence (KIN) to buy 1,400 of its towers at a price of $72,700 per tower. Bersama Infrastructure has set aside approximately $74 million for the development of new towers in 2018. It plans to build 1,000 towers on the islands and regions outside Java, many of which will be located on the island of Papua. Similarly, Sarana Menara Nusantara, along with the Djarum Group, is now open to acquisitions to strengthen its leadership position in the tower business. Further, IBS (in-building solution) Towers signed a deal with Sampoerna Telekomunikasi Indonesia (STI), which involved a buyback and leaseback of 371 towers from STI.

Myanmar

The telecom market in Myanmar is rather unexploited and underdeveloped in comparison to markets across the globe. The telecom market in Myanmar was liberalised only in 2013, after which Qatar-based Ooredoo and Norwegian Telenor Group entered the market in 2014. The competition amongst the two mobile network operators (MNOs) and state-owned MPT drove tariffs down and led to rapid growth in the number of subscribers along with an expansion of the country’s infrastructure.

Telenor and Ooredoo both adopted a model of leasing towers during their service roll-out. Mytel, which is the fourth and most recent operator to have entered Myanmar’s telecom market, will use a model of co-location with towercos and MNOs, in addition to rolling out its own base transceiver stations (BTSs) and towers. With Mytel’s service roll-out, the tenancy ratio in Myanmar, which is around 1.6 to 1.8 at present, is expected to increase to 2.

At present, there are 14,303 towers in Myanmar which are owned by various towercos and MNOs.

In order to build the tower infrastructure in Myanmar, Myanmar Technology Gateway has planned to invest about $24 million in the coming years, wherein $12 million will be set aside to set up 250 towers by March 2018. Besides, Apollo Towers is seeking to merge with Pan Asia Majestic Eagle Limited to create a combined entity having more than 3,000 towers and an enterprise value of at least $700 million, making it the biggest independent towerco in the country.

Cambodia

Cambodia is an emerging tower market with enormous potential and opportunities. Given a mobile penetration of 110 per cent and an exponential increase in data consumption, there exists stiff competition amongst the six MNOs (Smart Axiata, Metfone, Cellcard, qb, Seatel and Cootel) currently operating in the market. The policy framework in Cambodia allows for 100 per cent foreign ownership in the telecom sector.

The total number of towers in Cambodia is around 9,200, which are owned by towercos and MNOs. Towercos such as OCK, Viettel, Camtowerlink, edotco, etc. are well established in Cambodia. Smart Axiata owns 251 towers, Metfone owns 64 towers and Cellcard owns 52 towers. The towerco penetration in Cambodia was approximately 24 per cent at the end of 2017 and is expected to increase to 26 per cent by the end of the fourth quarter of 2018. As a result of overcrowding in the market, the tower sharing model is becoming more and more attractive for operators.

edotco directly owns and operates approximately 2,100 towers in Cambodia and plans to build about 200 to 250 towers per year over the next three years. In 2017, Camtowerlink successfully installed six camouflaged mobile towers inside the Angkor Archaeological Park, enabling the use of mobile phones for the first time in the park. They have now signed an agreement with the Apsara Authority to build an additional 18 camouflaged towers in the park. The demand for small cells, IBS and lamp poles has also grown in recent years.

Malaysia

The Malaysian telecom sector has a total of 22,802 telecom towers of which nearly 64 per cent are owned by towercos such as edotco, YTL, Naza Communications, OCK, Omnix and several state-backed towercos. The three MNOs, namely, DiGi, Maxis and Telekom Malaysia, also own a significant number of towers in Malaysia. The country has approximately 2,000 mobile subscribers per tower.

The Malaysian government encourages infrastructure sharing among service providers as it promotes efficient use of physical structures and makes economic sense. It also saves precious natural resources as duplication of infrastructure is wasteful. Any site in Malaysia can be shared subject to the availability of physical space and structural integrity of the aesthetic structure.

For the successful roll-out of 4G services in Malaysia, another 8,000 sites would be needed. The OCK Group, which has nearly 200 towers, plans to build another 70 to 100 sites in the near future. Naza Communications is also planning to build 1,000 towers across Malaysia by 2023 to make the most of the demand for mobility and internet of things and aid the roll-out of 5G services in the country. DiGi has also collaborated with edotco for new BTS sites and co-location. In order to expand coverage in rural areas, Malaysia’s Universal Service Provision Fund is being utilised to set up 2,000 rural sites.

Conclusion

Tower sharing helps reduce the cost of network operations and enables operators to achieve greater market coverage more effectively by avoiding duplication of costs. With major telcos across the Southeast Asia region expected to roll out 5G services in a few years time, mobile network infrastructure sharing will emerge as one of the key trends to ensure a faster and larger service roll-out.