Saudi Arabia is characterized by strong coverage and growing data use.
Internet penetration among Saudi nationals is around 93 percent and this may well account for the increasing popularity of online video streaming instead of TV throughout Saudi Arabia.
Daily TV viewing has dropped by 16 percent according to a recent report from Northwestern University in Qatar.
The increase in data use is also driven by the use of over-the-top (OTT) apps such as WhatsApp and Skype as well as from the rapidly growing use of YouTube and other social media apps including Twitter and Snapchat – although the latter has slowed recently due to privacy concerns.
To meet this demand for data, future growth will likely be around network infill and network consolidation while new 4G technologies are rolled out throughout the region.
This is because data doesn’t travel as far as voice communications so the network requires more towers to fill the gaps, said William Saad, Chief Operating Officer of I.H.S Towers, in an interview. Excerpts of the interview follow:
Chief Operating Officer of I.H.S Towers William Saad in an interview with the Saudi Gazette. (Supplied)
What kind of potential investment do you see for the Saudi telecommunications sector in the coming years, and in which areas?
Productivity and efficiency are the new key words in Saudi Arabia as the economy rebalances to cope with what people are calling the ‘new normal’. Telecoms has been identified as one of the most important industries that will help drive productivity, so we expect to see considerable investment in building and expanding the 4G network as well as rolling out new fiber technologies to cope with increased data use throughout the region.
Where does this put a company like IHS Towers? What do you do for the industry and where do you fit in the Saudi telecoms sector?
IHS is the largest independent tower company in Africa, Europe and the Middle East with over 23,300 towers across five countries in Africa. We are also the 9th largest in the world. The business has grown rapidly over the last 15 years as the market has changed and the mobile network operators (MNO) business model has had to adapt to an increasingly competitive landscape. Essentially, we have been playing a critical role in accelerating the development of Africa’s fast-growing information economy. IHS doesn’t comment on specific markets but we have an M&A team who is constantly on the lookout globally for new opportunities.
You talk about outsourcing infrastructure for telecoms operators. What does that mean, and what are the benefits to the industry?
The sheer size of the emerging markets, as well as their huge geographic diversity, creates serious challenges for MNOs. In addition, because tower infrastructure makes up the bulk of MNO’s capital investment, namely their operating costs, MNOs are opting to share or sell their towers – renting them from other telcos or selling/leasing them to towercos instead of making ongoing financial investments in infrastructure and management of those towers.
As a result, independent towercos have emerged as key participants in the telecoms value chain in recent years, providing financial and operational benefits for mobile operators through the outsourcing of towers. This is where a company like IHS Towers comes in.
At a time when the need for cash to invest in new network infrastructure is growing, the prospect of monetizing tower assets through sale and leaseback transactions with towercos is becoming increasingly appealing, in both developed and emerging markets.
In addition, benefits for MNO’s in outsourcing their towers to towerco’s include, opex reduction in the form of sharing costs of shared infrastructure between multiple operators. Capex reduction for network rollouts which is a driver for new entrants, for rollout in under-penetrated markets and rural areas, and where a new technology (e.g. 4G) requires more extensive sites; and capital raising where the monetizing of real estate assets by a sale and-leaseback with a towerco. This is a way of raising capital for investment in other markets or for new technologies.
How does your business model benefit consumers?
MNOs outsource their tower portfolios to IHS creating three significant and almost immediate benefits.
Firstly, for the customer, the network improves, uptime increases to over 99% and the network expands through tower sharing with other networks.
Secondly, for the MNOs, costs are stabilized and capital is released to spend on improving the network and developing products for customers.
Thirdly, for the country, wider, more reliable and efficient networks are built and maintained by professionals, promoting economic growth and protecting the environment.
You propose sharing towers, yet you also talk about rapidly rising demand. Doesn’t this mean there is a need for more towers, rather than for sharing them?
What we know for sure is that there are not enough towers in emerging markets to meet current and future demand. As a result, network extensions cannot come quick enough for some. Over the next few years, as MNO’s and towercos stretch networks into ever more remote locations to achieve universal coverage, demand for towers will only increase. However, network planners in various emerging markets have traditionally had the option to co-locate on a finite inventory of independent towers, but the number of leasable sites will increase exponentially in the next five years.
This article first appeared in the Saudi Gazette on May 26, 2016.SHOW MORE