After months of delays due to intense negotiations over pricing and terms, Ooredoo and Telenor have signed a second round of purchase orders for telecommunications towers.
But two of the four towers companies originally hired as official vendors have so far been left empty-handed, and two newcomers have been hired instead.
Norway’s Telenor has placed a new order for over 700 towers from Apollo Towers and an order for “roughly” 700 towers from a subsidiary of Young Investment Group called Eco-Friendly Towers (EFT), according to a Telenor spokesperson.
Young Investment Group is a Myanmar conglomerate with interests in a number of sectors including finance, insurance, construction, energy and mining. Subsidiary EFT is a new entrant to the towers market. Apollo Towers is so far the only tower firm to receive a repeat order from an operator.
Qatar’s Ooredoo has signed a new purchase order for 1000 towers with Irrawaddy Green Towers (IGT) and an order for 500 towers from Singapore Windsor Holdings, through its subsidiary Myanmar Infrastructure Group (MIG).
A spokesperson from Ooredoo confirmed both deals. IGT entered the market last year as an official vendor to build and manage 1438 towers for Telenor. It is the first tower company in Myanmar to sign with both international operators. MIG is a new entrant to the market.
Ooredoo has not announced plans to sign any new purchase orders with its existing official vendors, Pan Asia Tower (PAT) or Myanmar Tower Company (MTC). A source at Pan Asia confirmed that the company had not yet signed any new contracts.
MTC, owned by Digicel Group and YSH Finance, a subsidiary of Yoma Strategic, has recently been put up for sale, along with all its sites and contracts.
“MTC and PAT have been our appointed tower companies since last year. In order to roll-out faster to meet the high expectations of the people of Myanmar, and as we’ve committed to reach every state and region of the country during this year, we’ve appointed another two tower companies,” said Ooredoo spokesperson Daw Thiri Kyar Nyo.
The need for a faster rollout is clear. In the initial round of orders, the two international operators commissioned a total of 5000 sites from four tower companies, which were due for completion by early 2015, but progress has been much slower than anticipated. It is estimated that between 3000 and 4000 towers have been built so far, though no exact figures are available.
Mobile network operators have a target to provide coverage to more than 70 percent of the population by 2017. To achieve this, 17,300 tower sites will need to be deployed across the region by that date, according to the 2014 Green Power for Mobile report, published by industry body GSMA in collaboration with the International Finance Corporation.
Telenor and Ooredoo had initially planned to sign a new round of orders earlier this year, and issued a joint request for proposals in January. This was then cancelled, leading to further delays, as both sides wasted time preparing the documents.
“It’s great that negotiations have been concluded and towers ordered, but it comes at the same time as the beginning of the monsoon. This will mean a slower start to the roll-out than if we’d started in the sunshine,” said Philippe Luxcey, CEO of Apollo Towers.
However, he added that the company learned a lot from building through the rain last year and that while it is not ideal weather, construction will not stop.
Generally, tower companies make the initial investment to build each tower and provide upkeep and power for the site. The operators then pay a rental fee to place their equipment on the tower.
Some tower companies question whether their business models will be tenable over the long term, as operators are now able to pay lower rental rates due to increasing competition. One director at a tower company said that firms agreeing to the most recent terms outlined by operators will struggle to make a profit. This will make it more difficult to raise funding from banks or other lenders.
One of the original vendors, MTC, is looking to exit the business after just a year and is up for sale. Local competitors and large international players are reportedly bidding for its sites and contracts.
Industry insiders say this is likely to be the first in a number of deals that eventually lead to consolidation in the market.
Tower sharing is the best way for operators to keep their costs down and speed up the rollout process, while allowing tower companies to generate extra income. But despite the declared intentions of both Ooredoo and Telenor to share, it has not yet happened on a large scale.
“Telenor is focused on building a long term sustainable cost structure which will allow us to offer the most affordable services to the mass market in Myanmar and at the most remote places in Myanmar; tower sharing is an important element to make this happen,” said Petter Furberg, chief executive officer of Telenor Myanmar in an email.
Tower sharing will become increasingly important as operators expand their services beyond Myanmar’s major cities, and the building process becomes more difficult.
“Geographically the first round of towers was aimed at getting coverage up the central spine of Myanmar. Now it’s going to be much more spread out, mostly in rural areas, with fewer rooftop towers,” said Mr Luxcey.
“It will become more difficult in terms of access roads as we begin to build in more remote places, and there’s still a lot of Myanmar to cover.”
Source: Myanmar Times