African telecoms infrastructure firm Eaton Towers is continuing to expand its mobile operations and is one of a number of specialist players to launch services in Africa in recent years.
It plans to build another 250 transmitter towers in 2013, increasing its African portfolio by a sixth.
What's that down to? Growing internet use.
"We will build about 100 towers in Uganda, 100 in South Africa and 50 in Ghana," says Alan Harper, Eaton Towers' Co-founder and CEO.
Customers include Airtel, Vodafone, South Africa's MTN and Orange.
"The internet boom is one of the key drivers - more people are getting online as smartphone prices fall and telecom operators improve their networks. Mobile operators are building new base stations for two reasons – one is obviously coverage, and there is still some coverage expansion going on, but increasingly it is for adding capacity to the networks."
A lack of extensive fixed-line infrastructure in most African countries means mobile networks provide the main means for people to access the internet, he adds.
"That's right. With fixed-line penetration being so low in so many countries most of the data usage is on the mobile networks and therefore whether it is 3G, or now we are seeing some LTE development in some markets, new base stations are needed to meet that capacity growth. That is benefiting Eaton because that is adding to new base station installations on both our existing towers and it is one of the driving forces for the new tower construction as well."
Internet use in sub-Saharan Africa will rise to 24.7 percent of the population by 2020 from 10.5 percent in 2010, according to Euromonitor International.
"Why would a mobile operator approach us?" Harper asks. "Well firstly building and maintaining mobile towers in Africa is typically more expensive than in other regions because of high security costs and a shortage of electricity and infrastructure – Africa's main challenges. It adds to the complexity and expense. Secondly, many operators are increasingly looking at splitting costs, which they can do via tower-sharing deals – we offer that and so it is increasingly popular to have specialist firms such as Eaton build the towers, which can then host multiple operators at the same site. We're certainly looking to expand our tower-sharing business."
Eaton Towers is benefiting from operator plans to roll out things like 3G and LTE (long-term evolution, highspeed networks), Harper says. Further expansion is on the cards.
"Historically we operate in those countries so we have towers already. So, we are working with existing customers in existing markets. We are building towers and selling space on those towers in countries like Ghana, Uganda and South Africa where we'll be putting in the new towers as an expansion to our established business in those markets. And it'll be with existing customers, those we already have signed up on other towers. It is really a growth and consolidation in the markets we are already focused in.
"That's not to say we don't eye new territory and as we expand into other markets over time we will be building in new countries as well, obviously. But it doesn't really make sense to build just a handful of towers in new countries. You really look to try to build on top of a portfolio of existing towers in an established market."
Is expansion into new African nations likely further down the road? Yes, says Harper.
"At the moment we are looking at opportunities in East and West Africa – in the West there are three or four countries that we are working on.
"There are opportunities too in North Africa. Up until now, most of the tower activity has been sub-Saharan Africa but there are new opportunities emerging all over. We have a pipeline we are working on; I can't really go into the specifics but it is basically pan-Africa."
Capital International Private Equity Funds (CIPEF) is Eaton's majority shareholder, while London-based private equity group Development Partners International and Eaton's management team also owns stakes. The business is well funded and well-placed to expand. What's its secret?
"I think [firstly] we are very focused on what we do," says Harper. "We are a tower company for Africa. It is the only thing we do. We are not distracted by going into other continents or other markets outside of Africa or in other lines of business apart from being a tower company. Within that, we have built up an organisation with a very experienced group of people thathave been in the mobile business in Africa for many years. We know the countries, the people, the organisations and we know how business gets done in those markets. Importantly, we are well funded and that is significant because this is a very capital intensive game, there is a lot of money that needs to go into it. We have the required equity and debt funding already in place so that when we see opportunities for expansion either in existing or new markets we are able to go into those new opportunities. We don't have to go out and raise funds for a new idea or opportunity."
To learn more about Eaton Towers and its expansion visit www.eatontowers.com.
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