Tower management companies are an integral part of mature telecom markets. They build, own and operate telecom towers for various operators. According to industry experts, outsourcing tower management can reduce the operational costs of telcos by 50-60 per cent and help operators focus on the quality of service.
In Bangladesh, telecom operators have only recently warmed up to the concept of independent towercos and tower infrastructure sharing. Over the years, telecom has emerged as one of the fastest growing sectors in Bangladesh. Many international service providers are now looking to enter the country’s telecom market, particularly the tower infrastructure segment, indicating its growing significance in the world’s telecom landscape. To this end, the Bangladesh government is giving the relevant regulatory and policy impetus to the telecom tower market to flourish and replicate the success of the tower sharing business model followed globally.
Regulatory push for towercos
The country’s telecommunications and IT ministry has approved two guidelines as part of the recently announced licensing regime for towercos. These separate the telecom business from the network infrastructure business and allow a foreign company to increase its shareholding limit in a tower sharing company to up to 70 per cent, from the current 49 per cent. As part of the implementation process, the Bangladesh Telecommunication Regulatory Commission plans to award four towerco licences. It has so far received expressions of interest from 15 entities looking to establish their telecom tower business in Bangladesh.
As per the new licensing regime, towercos will have to own, build and maintain all telecom towers while operators, both mobile and other telecom service providers, will lease these services from them. Also, licensees will have to share 5.5 per cent of their revenue with the government and contribute another 1 per cent to the social obligation fund from the second year of procuring the licences. Further, as part of the new regime, telcos will have to roll back their existing towers within the next five years.
In line with the new regime, Grameenphone and Banglalink have launched their tower divestment initiatives. Banglalink has applied to the telecom regulator to establish a subsidiary company that will own and manage all of its 9,000 towers. When the government awards licences for towercos, it will sell off the subsidiary company to focus on telecom services.
Further, many international players and local companies have started announcing partnerships to apply for licences. Confidence Tower Holdings, a local player, has partnered with the American Tower Corporation, the global market leader in tower management. Further, edotco, a Malaysian infrastructure services company, has announced a partnership with local company Getco Group for running the tower business. Meanwhile, two local networking companies, Fiber@Home and Summit Communications, have also submitted their applications with their foreign partners. The Telenor Group, the parent company of Grameenphone, has also submitted an application along with local player Grameen Baybosha Bikash. Robi Axiata, Bangladesh’s second largest mobile operator by subscribers, has announced that it has signed a network-sharing pact with Teletalk and has agreed to share its cell sites across the country.
Potential benefits and the way forward
Setting up of towers can account for as much as 60 per cent of the total network roll-out costs for telcos. Leveraging services of independent towercos can significantly reduce the cost of network operations and enable operators to achieve market coverage more effectively. Operators can also avoid duplicating costs while extracting maximum benefits from scarce telecom resources such as spectrum. On a mobile network operator’s balance sheet, a tower is a depreciating asset built to serve the needs of a single owner, while on a towerco’s balance sheet, it is a source of long-term recurring revenue from multiple credit-worthy tenants.
With the roll-out of the new towerco licensing regime, the Bangladesh government aims to bring in significant cost efficiencies for telcos while improving the business prospects for towercos. That said, some industry experts believe that limiting the number of licensees to four may restrict competition.