DT editor James Barton recently spoke to Charles Green, CEO of Helios Towers Africa, about starting out providing infrastructure in sub-Saharan Africa. Initially a hostile environment, the infrastructure market is undergoing massive growth, with more investment likely in the near future.
DT: What were the factors that made Africa an attractive proposition to your business?
CG: In 2003, the founding partners of Helios decided to set up a tower company in Nigeria, which at the time had no independent tower companies. In a way, this was a pioneering decision – Nigeria provided a glimpse of how future growth in the tower industry could absolutely explode.
The country was massively underdeveloped at the time, and as we based our business model on its individual dynamics, we began to see that the same was true across much of sub-Saharan Africa. It was identical to what one could see across the emerging markets in the early stages of the tower business – whether it was South America or Asia – and it was a perfect opportunity.
DT: How did infrastructure-sharing come about?
CG: There were only a couple of operators who had been licensed at the time but it was clear that many other licensees would be entering Nigeria. That created a backdrop for significant potential co-location on any site in that market, so we started building every site from scratch. While obviously constructing the towers was not the easiest way of growing the business, operators at the time weren’t interested in letting others on to their sites too early. Nigeria was possibly the most hostile commercial and operating environment in sub-Saharan Africa, so building infrastructure there was a critical establishing factor for us. On the basis of the success we experienced in Nigeria, we’ve since expanded into other countries in sub-Saharan Africa, including Ghana, Tanzania and the DRC.
DT: Ghana has been mentioned as a particularly good test-bed for telecom deployments in sub-Saharan Africa. Would you agree with this?
CG: Ghana is somewhat less severe than Nigeria – its grid power for example is essentially the inverse of Nigeria’s: whereas in Nigeria power is supplied by generators for 18 hours of the day, in Ghana it’s about 4 or 5 hours. The complexity of the operating environment helps and it’s a smaller country, but with fundamental dynamics that support the business: there’s six operators plus ISPs and WiMAX providers coming, so a lot of potential demand.
There’s still good fundamental growth, with penetration rates around the African average, and there will be a requirement for 2G/voice as well as capacity. Data will probably take off fairly rapidly in Ghana compared to the rest of sub-Saharan Africa – it’s fairly sophisticated, with landed marine cable, so that will likely provide data growth. Again, you’re going to have significant growth and demand of points of service, and in the future those points of service won’t individually be handled by towers. There’s still a need for network coverage and capacity, and room for additional growth. With 6 operators there’s plenty of scope for multiple tenancies on individual towers. There’s also quite an enlightened and stable regulatory environment and that’s a huge help.
DT: What kind of business models are working best in this environment?
CG: What seems to work best is a model that balances some upfront monetisation of the assets and a reduction in operating costs. These days there’s a lot of interest from operators in retaining a residual stake; whether that will be pervasive remains to be seen.
This is what I would call the ‘perfect storm’ for the tower industry in Africa – it’s the best I’ve seen in any market in the world. There are perceived and actual risks that one has to be conscious of in Africa – they’re not necessarily unique but perhaps more pervasive, so you have to be careful, but if you balance these risks with the potential returns that you have in making investments in this business in Africa it’ll prove to be a sound move by investors from developed markets and even other emerging markets.