H ARDIMAN T ELECOMMUNICATIONS L TD. Financial, Strategy and Technology Consulting H ARDIMAN T ELECOMMUNICATIONS L TD. Financial,

HARDIMAN TELECOMMUNICATIONS LTD.

Financial, Strategy and Technology Consulting

http://www.telecoms.net

100 Pall Mall

St James’

London SW1Y 5NQ

+44-20-3239-9849

[email protected]

One International Finance Centre

Central

Hong Kong

+852-8199-0361

[email protected]

Keynote Presentation – TowerXchange Africa 2015

Future Perspectives on African Towers

Enda Hardiman

[email protected]

September 28 2015

Document Reference – HTL-M1-TOWERS-EPH28092015vR

WWW.TELECOMS.NETTMWWW.TELECOMS.NETTM

HARDIMAN TELECOMMUNICATIONSHARDIMAN TELECOMMUNICATIONS

Major MNOs and TowerCos

Consolidation Discontinuities



1. Bharti

2. Etisalat / MarocTel

3. MTN

4. Orange

5. Vodacom

Original Combined Installed Base of 100,000 Towers

36,000 Now Sold or in Sale / Leaseback, or Shared

All Seeking Sale, Joint Ventures

1. American Tower

2. Eaton

3. IHS

4. HTN

5. HTA

Combined Installed Base of 45,000 Towers

“Low Hanging Fruit” Phase Concluding

Smaller Transactions in Prospect

Two “Big Fives”

MNOs

TowerCos



Year Where Seller Buyer Towers Transaction Per Tower Type2015 Egypt Mobinil Eaton 2,000 $131,150,000 $65,575 SLB2014 Rwanda and Zambia Airtel IHS 1,113 $181,000,000 $162,624 SLB2014 Nigeria Airtel American Tower 4,800 $1,050,000,000 $218,750 SLB2014 Ghana, Niger, Burkina Faso, Kenya, Uganda, Malawi Airtel Eaton 3,500 $612,500,000 $175,000 SLB2014 Nigeria MTN IHS 9,151 $882,000,000 $96,383 JV - IHS 48%, MTN 51%2014 Nigeria Etisalat IHS 2,136 $485,000,000 $227,060 SLB2014 Congo B Airtel HTA 300 SLB2014 Rwanda and Zambia MTN IHS 1,269 SLB2013 Tanzania Vodacom HTA 1,149 $75,000,000 $65,274 SLB with Direct Investment2012 Cameroon and Cote d'Ivoire Orange IHS 2,000 MLL2012 Cote d‘Ivoire MTN IHS 931 $141,000,000 $151,450 SLB2012 Cameroon MTN IHS 827 $143,000,000 $172,914 SLB2012 Uganda Warid Eaton 400 SLB2012 Uganda Orange Eaton 300 SLB2011 Uganda MTN American Tower 1,000 $89,000,000 $89,000 JV - ATC 51%, MTN 49%2010 Tanzania Millicom HTA 1,020 $80,000,000 $78,431 JV - HTA 60%, Millicom 40%2010 DRC Millicom HTA 729 $45,000,000 $61,728 JV - HTA 60%, Millicom 40%2010 Ghana, Niger, Burkina Faso, Kenya, Uganda, Malawi MTN American Tower 1,876 JV - ATC 51%, MTN 49%2010 South Africa Cell C American Tower 1,400 $200,000,000 $142,857 SLB with acquisition rights2010 Nigeria Starcomms SWAP 407 $81,000,000 $199,017 SLB2010 Ghana Vodafone Eaton 750 MLL2010 Nigeria Visafone IHS 800 $67,000,000 $83,750 SLB2010 Nigeria Multilinks HTN 400 SLB2010 Ghana Millicom HTA 750 $54,000,000 $72,000 MLL

• More than $4.3b Deployed• 84% of Towers Sold Were Sold by the Big Five MNOs – 36% of Big Five Towers Now Sold – 50,000 Remaining• 99% of Towers Acquired Were Acquired by the Big Five TowerCos• Few Countries Feature Multiple Tower Operators

The Two “Big Fives” Dominate Towers Transactions to Date



There are Only MNO Three Positions Worth Having

5

Strong

Market Share

Usually 25% - 35%

Strong in Specific

Market Sectors

Capturing Selected Market

Sectors from Leader

ARPU Consistent

with Income(s) of

Decile(s) Addressed

Usually Operates Nationally

May Have Prioritised Regions

Contender

Market Share

Usually

12% - 15%

Recent Growth

Strong in Specific

Market Sectors

Has ITSELF Defined and

Exploited Specific Sectors

Clear Strategy to

Address Other

Market Sectors

May Operate Nationally

Usually Has Prioritised

Regions

Lead Innovator

Dominant

Market Share

Usually 40%+

Present in All

Market Sectors

Not Losing Market Share

Selectively by Sector

ARPU Consistent

with GDP per Capita

to 15% of

Household Income

by Decile

Operates Nationally

Leader

Viable – All Africa Viable – All Africa

Viable In Very Specific Instances Only



MTN Orange Vodacom Bharti Etisalat / MarocTelMkt Posn Mkt Share Mkt Posn Mkt Share Mkt Posn Mkt Share Mkt Posn Mkt Share Mkt Posn Mkt Share

Benin 1 58% 2 28%Botswana 1 70% 2 30% Burkina Faso 1 39% 3 18%Cameroon 1 54% 2 41% CAR 2 32% 3 18%Chad 1 69% Congo-B 2 26% 1 55% Cote d'Ivoire 2 35% 1 36% 4 25%DRC 5 8% 2 34% 1 38% Egypt 2 37% Equatorial Guinea 1 78% Gabon 1 52% 2 12%Ghana 1 45% 3 13% Guinea 1 53% 1 43% 2 Guinea Bissau 1 73% 2 47% Liberia 1 54% Kenya 4 3% 2 40% Lesotho 1 80% Madagascar 3 29% 1 40% Malawi 2 39% Mali 1 55% Mauritius 1 53% Morocco 2 29% Mozambique Niger 2 28% 1 56% 4 9%Nigeria 1 44% 2 21% 4 14%Rwanda 1 60% - Senegal 1 57% Sudan - North 2 30% 1 Sudan - South 2 30% 1 Sierra Leone 3 23% South Africa 2 36% 1 52% Swaziland 1 100% Tanzania 1 37% 2 30% 4 18%Togo 2 26%Tunisia 3 16% Uganda 1 43% 2 30% Zambia 2 40% 1 45%

MNO Risk Profile – 38 Countries of the Big 5



African Regions With More than 3 Operators, Big Five Status

1. Bharti

2. Etisalat / MarocTel

3. MTN

4. Orange

5. Vodacom

Secure in Market Shares

MUST Enhance EBITDA

Is in Trouble

Secure

Must Rationalise

Secure



Conclusions re Consolidation

Difficult to see Future for Etisalat / MarocTel

Bharti Will Probably Improve EBITDA, and Remain

Orange will Likely Rationalise, and Remain in Strategic Regions

MTN and Vodacom Seems Secure

Growth by Acquisition Could Lead to a “Glut” of Towers

Competent Regional Players Could Gain Enhanced Mass

Econet

Millicom

LTE Players

More Positive Vista for Towers in General

For Leaseup Rates in Particular



Infrastructure Sharing

Technology Discontinuities



CONSIDERATIONSFundamental Market EconomicsGDP, Penetration, CeilingUnderlying EconomyDemographics, Wealth

DistributionTower LocationsCoverage – Current BandsCoverage – Intended BandsVoice Traffic TrendsData Traffic TrendsTRx CapacitiesSectorisationCompetitive Tower OverbuildTower and Antenna DemandRationalisation ScenariosColocation ScenariosBuild-to-Suit ScenariosTenancies and Lease-up DemandRevenue PotentialScenario and Sensitivity

ModellingRisk Quantification

Risk Mitigation Stratagems

Refresher – How TowerCos Make Money

OUTPUT

Tenancies

Leaseup

Revenue

OpEx (From Tech and Op DD)

CapEx (from Tech DD)

Performance

Scenarios

Sensitivities

Risks

Risk Mitigation

Monetisable Categorisations

A B

BTS

ZoneA B

Overlap

ZoneA B

A B

RATIONALISATION

COLOCATION

OVERLAP

BUILD TO SUIT



Dominant Model - Four Types of Passive Tower / Site SharingAlso illustrating, for completeness, possible active backhaul sharing

• Current Models

• Relatively Low-Tech

• Well Established

• Well Understood



Active Infrastructure Sharing – Shared RAN and 2G/ 3G Shared Backhaul Cases

• Business Logic is Clear

• Gaining Favour with Regulators

• Threat to Current Tower Models

• But Opportunity for TowerCos –

• Upskill

• Radio Engineering

• Transmission Provision

• End-to-End Support

• Increased Margins



Active Infrastructure Sharing – 2G / 3G Shared Transmission Backbone Case

Noteworthy

• MTN’s recent deal with Liquid Telecom

• Areas of Possible Competition / Opportunity

• Node siting

• Dark fibre spans

• Managed Network Services



Shared Transmission Backbone

Elements of Radio Access and Backhaul May or May Not be Shared

Unshared Core Elements – Network A Unshared Core Elements – Network BShared OMC

Shared VAS Platforms

For Completeness – Full Network Sharing – 2G 3G Case



LTE Vista

Long Term

Sub-$20 Handsets

Tactical RRU Siting

New Radio Planning

Fibre Connection – Short-haul

Recasting

Fibre Connection – Long-Haul

Value of Individual Towers

TowerCo Business Models

Regional Plans

Medium Term

Strategic Acquisitions by MNOs

Penetration of Medium Market Sectors

Complementary to Fibre Initiatives

Demand for Tower Space

900 MHz

1800 MHz (especially)

2600 MHz

Short Term

Penetration of High Market Sectors

Complementary to Fibre Initiatives

Demand for Tower Space

900 MHz

1800 MHz (especially)

2600 MHz



Conclusions



Conclusions

Consolidation is Imminent, Especially in Central Africa

Uncertain Future for Orange and Etisalat / MarocTel

Bharti Must Enhance Performance

Current Mid-Ranked Performers May Enhance Positions

Limited, but Clear Opportunities for Niche Players

Smaller Tower Deals Will Predominate

Ferment Will Require Rigorous Zonal Analysis

Technical Discontinuities Open Upskilling Opportunities

LTE is in Prospect, but Not an Immediate Threat

More Complex Businesses, Potentially Higher Margins

MNOs TowerCos

Documents

H ARDIMAN T ELECOMMUNICATIONS L TD. Financial, Strategy and Technology Consulting H ARDIMAN T ELECOMMUNICATIONS L TD. Financial,