Adroit Market Research - Industry Insights

Conventionally, TowerCos have experienced higher revenue growth due to growing tenancy ratios on their portfolio of sites. The coming in demand for wider network coverage and lesser network capacity has surged, leading to sustained duration of higher tenancy ratios for TowerCos. However, this trend is losing traction, as operators in developed markets like Europe are not exhibiting interest in coverage expansion and to a lesser extent small cells to offer network capacity and partially utilizing rooftops. Moreover, there are different sources of revenues from tenants installing new equipment on existing sites and densifying networks in order to enhance the quality of data services.

Conventionally, TowerCos have experienced higher revenue growth due to growing tenancy ratios on their portfolio of sites. The coming in demand for wider network coverage and lesser network capacity has surged, leading to sustained duration of higher tenancy ratios for TowerCos. However, this trend is losing traction, as operators in developed markets like Europe are not exhibiting interest in coverage expansion and to a lesser extent small cells to offer network capacity and partially utilizing rooftops. Moreover, there are different sources of revenues from tenants installing new equipment on existing sites and densifying networks in order to enhance the quality of data services.

The traditional growth story of TowerCos was based on roll-out to improve network coverage and capacity

In the 1990s, when network were deployed for the first time, mobile operators commenced with a deployment of sites in order to offer coverage. With the increase of take-up and usage, the growing demand in dense urban geotypes compelled operators to deploy additional sites to offer supplementary capacity. This trend has opened gateways for TowerCos to host extra operators on each site. By higher tenancy ratios, TowerCos has escalated revenues, without a commensurate increase when compared with fixed cost bases. The tower industry has leveraged in developed nations which implemented the model at an early stage. In the USA markets, TowerCo model were highly adopted compared to European markets.

In developed markets, this story no longer holds

In case of developed markets, mobile networks usually covers approximately 98% of the audience, and the businesses tends to be compact when talked of expansion. Instead of expanding the footprints, growing competition led to launch of new technologies within their existing business sphere.

The deployment of these new technologies is achieved with help of co-location on existing infrastructure. The factor that drive additional capacity in mobile network is growing rates of data consumption. But the requirement to deploy supplementary capacity sites got reduced by competent developments such as the graph of capacity can go up by alteration or addition to spectrum resources, which are abundant compared to past. The spectrum resources got increased as in past these additional spectrum and bands were instead used for 2G. Technological developments have also allowed existing sites to provide more efficient spectrum use and higher throughput. Clearly, important capacity roll-outs are continuing; a greater share which may be catered by rooftop sites and to, a lesser degree in Europe at least, distributed antenna systems (DAS) and small cell deployments. When operators deploy on macro towers for capacity causes may not be as crucial as would be implied by consumption patterns of consumer data. TowerCos’ has been able to monetise the ongoing demand for rooftop sites due to building agreements allow lease agreements and permit restrictions.

Higher revenue growth can be obtained from existing tenants by upgrading current sites

operators have tendency to promptly accept new spectrum bands, new technologies (mainly 4G) and emerging solutions such as multiple input multiple output (MIMO) and carrier aggregation antenna technology. Relying on operators’ structure of lease agreement and antenna/equipment strategies, this could be an indication of growth opportunity for TowerCos.

To deploy new spectrum, operators can either add an additional set of antennas to an existing site, or replace the existing antennas with new multiband antennas that support both the old and new spectrum bands Based on current specifications, it is possible for mobile operators to adopt multi-band antennas which would cover all existing and future frequencies, with up to five bands per antenna being technically feasible without increasing the dimensions of the antenna. Indeed, towards the end of 2014, Optus in Australia became one of the first operators in the world to commercially operate 4G across five bands on a single site.1 However, there is some performance degradation associated with the use of multi band antennas. As such, multi-band antenna deployments have more typically been limited to two or three bands. Key driver for network evolution is the deployment of new spectrum bands, which improve coverage, offer additional capacity or enhance achievable individual user throughput or support new technologies using carrier aggregation. This is particularly when there is presence of 700MHz spectrum light. Same is auctioned in Germany and has started to become available in Europe. Deploying new spectrum, operators can opt for setting up supplementary set of antennas to already existing site or substitute existing antennas with new multiband antennas that are capable to support new and old spectrum bands.

On the basis of current specifications, it is possible for mobile operators to have multi-band antennas covering existing and future frequencies. The capacity goes up to five bands per antenna without adding dimensions of the antenna. In 2014, Optus in Australia ranks as first operator across the world to operate 4G across five bands on a single site. However, multi-band antennas may deter the performance as its deployments is constrained to two or three band.

At first, it is anticipated that substituting existing antenna with multi-band equipment may not soar the amount of equipment on towers. But practically, tower loading can increase due to deploying multi-band antennas to adjust extra spectrum bands. This will demand operators to deploy supplementary electronics which expands the total size and operator’s antenna equipment loading. For instance, an operator has to substitute 300kg existing equipment with 1800kg on TowerCo sites for the launch of multi-band antennas. Moreover, key operators have opted to deploy integrated radio and antenna systems, which are considered significant in size.

Most European operators deploy MIMO antenna technology to extend the throughput or cell range with consuming lesser bandwidth and power. This kind of technology let an operator receive or transmit multiple copies of the original signal over various independent radio paths. Eventually, this may led to further growth in tower loading.

In developed markets, growth opportunities for TowerCos is high but the level of growth is proportional to the specifics of the market.