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Cell Tower (Mast) Outsourcing Sweeps African Mobile Landscape: Cheaper to Lease than Own

18 November, 2013
ICT Africa News
By Stuart Little – Aviat Networks – 18 NOVEMBER, 2013

Stuart Little, Director of Solutions Marketing, Aviat Networks

There are many reasons why mobile phone network operators might move from owning their own cell towers to leasing them. But primary among these is the bottom line cost of owning towers versus leasing them: by switching from owning towers to leasing towers, mobile operators can unlock the value they have built up in site infrastructure. In fact, tower outsourcing is already happening across Africa, with MTN, Vodacom and Airtel all actively engaged in investigating outsourcing in countries such as Rwanda, Tanzania and Zambia, amongst others.

Cellphone sites capital-intensive
Basically, building new cellphone sites is extremely capital-intensive. For example, the Association of Licensed Telecommunications Operators of Nigeria (ALTON) estimates that the Nigeria market needs another 50,000 to 60,000 towers, or masts, for optimum mobile network coverage across that country. Multiply that by the US$200,000 price to build a new tower in Nigeria, including the cost of obtaining all necessary permits, acquiring land and providing a private supply power—usually from a diesel generator—and the industry expenditure becomes mind boggling.

Operators can also make money off their tower infrastructure by selling it and then leasing back space on the tower for their equipment. With the money from the tower sales, operators can reinvest it into improving and expanding their networks, including deploying new 3G and LTE base stations and upgrading their backhaul networks to full-IP for higher capacity. For example, in Russia, wireless carrier VimpelCom has been investigating sales of 80 percent of its towers, which would generate up to US$500 million.

Economies of scale
Tower infrastructure companies can be more efficient at operating sites, and enable greater efficiencies by leasing the same towers to multiple operators. In addition, operators cannot always run sites that efficiently and as a result of outsourcing they remove the cost and headache of building, maintaining and operating thousands of cell sites.
Outsourcing is also good for the environment and the general population, because putting multiple operators on one tower avoids the proliferation of cell sites where operators install their own towers, often side by side in certain locations. Single sites are also more efficient and environmentally friendly because they will consume less power and hence less diesel fuel.

Sharing the network
Infrastructure and tower sharing can extend even further, to where operators are sharing the actual network, including the base stations and microwave backhaul for aggregating base station communications. This does not suit many operators and requires close cooperation between often competing mobile operators, so it is not a model that has been adopted widely around the world.

Difference in costs
Today, operators typically focus on CAPEX (cost to purchase and deploy network equipment), and pay less attention to the OPEX costs (costs to operate and maintain cell sites), as these are harder to predict. However, when an operator moves to an outsourced tower model, the leasing of the cell site and tower space becomes a major OPEX driver. This includes space for a base station and microwave shelter or cabinet on the ground, power for the telecoms equipment and air conditioning, and the space on the tower for antennas. Larger shelters and bigger antennas mean higher recurring lease costs, driving up OPEX.

One way of reducing these costs is to reduce the size of the microwave antennas. In the US, reducing the antenna size on a link by one size reduces the lease cost by US$400 per link, per month. Over the course of a year, these amounts to US$4800 per link, which is comparable to the purchase price of the microwave equipment, every year? Multiply that by 1000 links, and you can see that operators can save millions of dollars by focusing on reducing antenna sizes.

The shift of microwave backhaul technology to full-IP has made available a number of new solutions and techniques that enable operators to optimize their backhaul networks to lower OPEX in an outsourced model.

Stuart Little is director, solutions marketing, Aviat Networks, a microwave backhaul vendor to the mobile operator industry.


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