Tower sharing to be preferred model in Africa: F&S
Tower and infrastructure sharing among telecoms providers will become the preferred business model in Africa as companies come around to cost saving benefits and potential penetration increase, business research and consulting firm Frost & Sullivan says.
Iyembi Nkanza, an analyst at Frost & Sullivan said that infrastructure sharing had been widely adopted in the USA, Europe and Asia. Towers had been consolidated in order to unlock the value in reducing CAPEX, and this trend was gaining momentum in Africa. He said that service providers, tower companies and regulators were the stakeholders whose interests must be balanced if the trend was to gain momentum.
Frost and Sullivan noted that SA, Kenya, and Ghana were at the forefront of the trend to share infrastructure in Africa and provided telecom companies with the leverage to invest in other services. Nkanza noted that it was usually countries with more than three service providers who had some kind of sharing deal.
His comments followed research out on Monday [19 September 2011] by audit, tax and advisory services firm, KPMG, which found that costs of providing network infrastructure were being slashed as operators accepted that they could share some basic facilities. The group said that aggressive pursuit of lean business models was persuading operators to treat tower sharing as a viable option, which could cut infrastructure costs by as much as 16% to 20%.
Nkanza said that the prospect of increasing network coverage amid declining average user spend for telecoms was compelling for operators, while regulators had made it easier to adopt sharing practice, to push the initiative forward.
F&S said that "green laws" while not yet properly established in Africa, would also be a driver of infrastructure sharing in the future.
Highlighting the restraints on this model in Africa, Nkanza noted a perceived loss of service control. "This is definitely a constraint now, but as average revenue per user goes down, this will become less of a constraint."
The research firm said that while regulators had helped facilitate tower sharing in some African countries, a lack of regulatory guidance in others also served as a barrier as some regulators did not have the necessary regulation to actively promote sharing.
F&S underlined a potential saving of up to US$2 billion over ten years for companies who chose to lease towers, rather than invest between US$200,000 - US$250, 000 to put up a tower of their own. The group added that this figure was conservative as some analysts had pointed to figures of between US$10 billion and US$20 billion.
Using a figure of US$225 000 and on the basis of investing in 3 000 towers and increasing that number by 10% every year, taking inflation into account, would see a company spending as much as US$2.4 billion, F&S said.
By leasing tower infrastructure, Nkanza said that mobile operators could be left to develop backhaul infrastructure with freed up cash flow, and also enabled companies to focus on a better product offering.
Source: AFP
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