TowerXchange Meetup Americas 2016 Post Event Report · TowerXchange Meetup Americas 2016 Post Event Report Insights and findings from the third annual gathering of 200+ CALA telecom

TowerXchange Meetup Americas 2016 Post Event Report

Insights and findings from the third annual gathering of 200+ CALA telecom infrastructure executives

www.towerchange.com

(Chairman) Daniel Lee Managing DirectorIntrepid Advisory Partners

Zhiyong ZhangChairman & PresidentMiteno

Akhil GuptaChairmanBharti Infratel

Nat-sy MissamouSharing New Business Program Director, Orange

Nina TriantisManaging Director, Global, Head of Telecoms & MediaStandard Bank

Terry RhodesCEOEaton Towers

Marc GanziPresident, Digital Bridge &Mexico Tower Partners

Arun KapurCo-FounderIrrawaddy Green Towers

James Maclaurinformerly CEOedotco

Areef KassamDirector of InfrastructureGSMA Mobile for Development

Ayman Al AdlDirector - TMTStandard Chartered Bank

Dagan KasavanaCEOPhoenix Tower International

Chuck GreenExecutive ChairmanHelios Towers Africa

Suresh SidhuCEOedotco

Malcolm CollinsChief ExecutiveCTIL

Ted ZhongCEOQ Towers International

Hal HessEVP, International Operations andPresident, EMEA and Latin AmericaAmerican Tower

Nobel TanihahaPresident DirectorPT SOLUSI TUNAS PRATAMA (STP)

Umang DasChief MentorAmerican Tower

Gilles KuntzCEOTowerCo of Madagascar

Maria ScottiCEOTorrecom

David MeganckFounder and COOAcsys

Tilak Raj DuaDirector GeneralTAIPA

Dimitris LiouliasGM of StrategySaudi Telecom Company

Kurt BagwellPresident InternationalSBA Communications

Jim EisensteinChairman & CEOGrupo TorreSur

Bimal DayalCEOIndus Towers

Inder BajajAdvisor, Helios Investment Partners & former CEOHTN Towers

Riana DonaldsonManager: International Network Operations SupportVodacom

Tunde TitilayoVice ChairmanSWAP International

Jack DessayManaging DirectorMacquarie Capital

Jeffrey EldredgePartnerVinson & Elkins

Enda HardimanManaging PartnerHardiman Telecommunications Ltd.

Adeel BajwaSenior GM of Legal Affairs and ContractsWarid Telecom

Scott CoatesCEOWireless Infrastructure Group

Carlo RamellaCOO, EI Towersand Chairman, Towertel

Alexander ChubPresidentRussian Towers

With special thanks to the TowerXchange “Inner Circle”About TowerXchange

Founded in 2012, TowerXchange is your independent community for operators, towercos, investors and suppliers interested in EMEA, CALA and Asian towers. We’re a community of practitioners formed to promote and accelerate infrastructure sharing. TowerXchange don’t build, operate or invest in towers; we’re a neutral community host and commentator on telecoms infrastructure.

The TowerXchange Journal is free to qualifying recipients. We also provide webinars and regular meetups. TowerXchange monetises this community through hosting annual Meetups and the sale of advertising, without compromising editorial integrity.

TowerXchange was founded by Kieron Osmotherly, a TMT community host and events organiser with 18 years’ experience, and is governed with the support and advice of the TowerXchange “Inner Circle” – an informal network of advisors

Our informal network of advisers:

© 2017 Site Seven Media Ltd. All rights reserved. Neither the whole nor any substantial part of this publication may be re-produced, stored in a retrieval system, or transmitted by any means without the prior permission of Site Seven Media Ltd. Short extracts may be quoted if TowerXchange is cited as the source. TowerXchange is a trading name of Site Seven Media Ltd, registered in the UK. Company number 8293930.

| TowerXchange Meetup Americas 2016 report | www.towerxchange.com/meetups/meetup-americas2

Contents

XX TowerXchange Meetup Americas roundup

XX Testimonials

XX 2016 attendee list

XX How we promote Meetups

XX The Americas tower market

XX TowerXchange’s who’s who in CALA towers

XX Selected panel and roundtables report

Invaluable roundtable debate

Panel discussions After hours networking!

TowerXchange Meetup calendar

< TowerXchange Meetup Europe, April 4-5, 2017

< TowerXchange Meetup Americas, June 7-8, 2017

< TowerXchange Meetup MEA, October 3-4, 2017

< TowerXchange Meetup Asia, December 12-13, 2017

www.towerxchange.com/meetups/meetup-americas | TowerXchange Meetup Americas 2016 report | 3

Foreword by TowerXchange209 top executives from the Central and South American telecom tower industry joined TowerXchange in Boca Raton for the third edition of the TowerXchange Meetup Americas. The audience included an unprecedented 95 representatives of 41 different towercos, joined at the exclusive Boca Raton Resort & Club by senior representatives of leading MNOs, investment and advisory firms, strategic consultants as well as key solution providers from across the region.

The two-day programme included a high-level overview of the CALA telecom tower market as well as detailed insights into the governing dynamics of Mexico, Central America and the Caribbean, the Andean region, Brazil and Argentina. The panels delved deep into the characteristics of each market, their opportunities and challenges as well as their individual roles in the development of the regional industry as a whole.

Forty-two roundtable discussions offered an unparalleled occasion for everyone to discuss operational, financial and strategic issues in an informal and yet highly effective way while country-specific roundtables provided even deeper insights into the dynamics of each regional market.

On June 16, over ninety executives joined TowerXchange for an evening of informal networking, exotic drinks and fine dining. Once again, TowerXchange gathered everyone who counts from the regional telecom tower industry under one roof to talk business, network and - why not? - have some fun!

And while the TowerXchange team is already working hard on the fourth annual TowerXchange Meetup Americas, which will be back in Boca Raton, 7-8 June 2017, we offer our readers exclusive content into what was discussed at last year’s event.

It’s always refreshing to see so many familiar faces in the audience at the TowerXchange Meetup Americas and we look forward to welcoming you once again this coming June!

Warmest regardsKieron Osmotherly Arianna NeriFounder and CEO Managing Director, Americas and AsiaTowerXchange TowerXchange

Arianna Neri, Managing Director, Americas & Asia, TowerXchange

Kieron Osmotherly, Founder & CEO, TowerXchange


TowerXchange Americas 2016 at a glance

Seniority of the TowerXchange Meetup Americas 2016 attendees

C-level

Director-level

Mging Exec /

Senior Manager

VP, SVP, Partner

Audience profile, TowerXchange Meetup Americas 2016

Towercos Investors

Energy providers RMS suppliers

Advisors and law firms

MNOs Access control

Others

26%

18%28%

28%

2 days of intensive discussion and networking included:

Join us on 7-8 June 2017 for the fourth annual TowerXchange Meetup Americas!

Find out more at www.towerxchange.com/meetup-americas/

Amongst the delegation were:

95tower executives

51CXOs of towercos

41different towercos represented

16 sponsors and exhibitors benefited from:

Strategic partner panels and roundtable moderator roles

Executive industry interviews

Exposure to a database of 35,000 tower industry leaders

Extensive on-site branding

5 regional panels

14 country focus

1 TowerXchange keynote

10 operational best practices

18 strategic and financial

Lively cocktail and dinner party

42 interactive roundtables:


44 %

12% 11%

9%

8%

8% 3% 5%

Feedback from TowerXchange Meetup Americas 2016 attendees

“An excellent opportunity for business” - Eduardo Martins Pedro, COO, AlfaSite

“The TowerXchange Meetup Americas was well worth the time and financial investment in attending” - Clayton Funk, MD, MVP Capital

“As someone analysing the industry I gained plenty of new insights from attending the TowerXchange Meetup Americas, while making a good range of new industry contacts” - Alex Wright, MD, Nau Securities

“The TowerXchange Meetup Americas is the essential event for understanding the latest in the tower market in the Americas”- Joseph Landon, CEO, Planetary Power, Inc.

“All key decision makers in the infrastructure business present in one event” - Cesar Peña Alvarez, LatAm Sales Director, Mer Group

“TowerXchange pulled it off again. I believe the insight and collaboration that is facilitated at these events are guiding the industry forward” - William Bubenicek, CEO, Cambridge Clean Energy

“The TowerXchange Meetup Americas provided me with critical insights into the LatAm market, its players and challenges” - Jos Baart, VP Sales and Marketing, Flexenclosure


The Central America and Caribbean panel Networking during breaks

TowerXchange Meetup Americas 2016 attendee listAdvisory firms: investment strategy legal Alpina Capital, LLC, ConsultingAlpina Capital, LLC, Managing DirectorDelmec Engineering Ltd, Chief Executive OfficerFirst Corporate Finance Advisors, Deputy ManagerFirst Corporate Finance Advisors, Head of Marketing and CommunicationsFirst Corporate Finance Advisors, PresidentMVP Capital, Managing DirectorNau Securities, Managing DirectorRBC Capital Markets, Managing Director

Analyst associations or publishersAnalysys Mason, Senior PartnerInside Towers, Co-FounderSmall Cell Forum, CEOSmall Cell Forum, VP

Independent towercosAdvanced Wireless Communications, General ManagerAlfaSite, COOAlfaSite, CPOAmerican Tower Corporation, Country Manager, PeruAmerican Tower Corporation, Head of Operations - BrazilAmerican Tower Corporation, Senior Strategic Implementation LeadAmerican Tower Corporation, VP, Emerging MarketsAndean Tower Partners, CEOAndean Tower Partners, General Manager ColombiaAndean Tower Partners, Marketing and Sales Operations DirectorAndean Tower Partners, VP Mergers and AcquisitionsAndean Tower Partners, VP OperationsBAI Communications, VP Corporate DevelopmentBalesia Towers, Business Development Manager LATAMBalesia Towers, CEOBrazil Tower Company, DirectorBrazil Tower Company, Managing Partner - Business DevelopmentContinental Towers Corp, Chief Operating OfficerContinental Towers Corp, Country Manager - Costa RicaContinental Towers Corp, Legal ManagerContinental Towers Corp, Portfolio Manager

Continental Towers Corp, Site & Acquisition CoordinatorDicotel, S.A. de C.V., PresidentEI Towers, CFOEI Towers, COOEurasia Telecom, CEOEVEN Telecom, CEOGAFC Telecom Acquisitions ManagerGrupo TorreSur, CFOGrupo TorreSur, Chairman and Chief Executive OfficerGrupo TorreSur, COOHighline do Brasil, DirectorHightel Towers, CEOHightel Towers, COOInnovattel/Torresec, General Manager of ArgentinaInnovattel/Torresec, President & FounderInnovattel/Torresec, Vice President and Chief Operating OfficerInnovattel/Torresec, VP M&A and Corporate DevelopmentIntelli Site Solutions, Co-CEOIntelli Site Solutions, Co-CEOIntelli Site Solutions, DirectorMexico Tower Partners, CEOMexico Tower Partners, CFOMexico Tower Partners, General CounselMexico Tower Partners, Sr. VP of OperationsMexico Tower Partners, VP Business DevelopmentMexico Tower Partners, VP Mergers & AcquisitionsMX Towers, CEOMX Towers, CFONMS, CEONMS, Executive Vice PresidentPhoenix Tower do Brasil, CEOPhoenix Tower do Brasil, VP Sales & Development, South AmericaPhoenix Tower do Brasil, CEOPhoenix Tower do Brasil, Director of Corporate Development & Sales Latin America/Caribbean - GM, Dominican RepublicPhoenix Tower do Brasil, Director of Sales & Development, PeruPhoenix Tower do Brasil, General Manager Central AmericaPhoenix Tower do Brasil, LATAM General CounselPhoenix Tower do Brasil, Vice President, Mergers &

AcquisitionsPhoenix Tower do Brasil, Vice President, OperationsQMC Telecom International, Co-CEOQMC Telecom International, Accounting ManagerSBA Communications, Director, Corporate & Brand CommunicationsSBA Communications, General Manager, ColombiaSBA Communications, President and CEOSBA Communications, President, InternationalSBA Communications, Senior Director – LatAm Business DevelopmentSBA Communications, SVP, M&ASBA Communications, VP & Associate General Counsel - InternationalSBA Communications, VP, Asset OptimizationSBA Communications, VP, Business DevelopmentSBA Communications, VP, FinanceSBA Communications, VP, InternationalSBA Communications, VP, International OperationsSKYSITES Americas, CEOSouthcom Holdings, DirectorSouthcom Holdings, Managing DirectorSouthcom Holdings, Managing DirectorSummit Wireless Infrastructure, CEOSummit Wireless Infrastructure, Vice PresidentTELXIUS, CEOTerra Towers, Corporate Development OfficerTorrecom, CEOTorrecom, Co-Founder & Managing PartnerTorrecom, Co-Founder & Managing PartnerTorrecom, COOTorrecom, Country Manager Guatemala & NicaraguaTorrecom, Country Manager MexicoTorrecom, Technical Manager of New TechnologiesTorres Andinas, COOTorres Unidas Management, CEOTower 3 Wireless, PresidentVertical Bridge, CEOWestchester Services, Managing Director

InvestorsAlbright Capital Management, Managing DirectorASTEM, Managing DirectorCiti | Investment Banking, Managing Director, Head of Telecom Infrastructure


TowerXchange Meetup Americas 2016 attendee listCook Children’s Health Care System, CFA | Senior Investment AnalystInternational Finance Corporation (IFC), Global Head - TMT GroupInternational Finance Corporation (IFC), Global Tower Sector LeadInternational Finance Corporation (IFC), Investment Officer Telecom, Media, Technology & Venture CapitalMacquarie Group, ManagerMacquarie Group, Senior Vice PresidentMadison Dearborn Partners, DirectorMadison Dearborn Partners, Managing DirectorMadison Dearborn Partners, Vice PresidentPeppertree Capital Management, AnalystPeppertree Capital Management, AnalystPeppertree Capital Management, Senior Managing DirectorRBC Capital Markets, Managing DirectorScotiabank, DirectorSilver Swan Capital, Managing PartnerSoroban Capital Partners, AnalystSouthern Cross Group, DirectorSouthern Cross Group, DirectorTillman Global Holdings, Vice President - Business DevelopmentUBS, Managing Director - Head of Brazil and Southern Cone

LawfirmsNorton Rose Fulbright, PartnerNorton Rose Fulbright, Senior Associate Phillips Lytle LLP, Attorney, Land, Environment & EnergyPhillips Lytle LLP, Partner, Telecommunication Practice LeaderVinson & Elkins RLLP, Senior AssociateVinson & Elkins RLLP, Senior Associate

Managed Service ProvicerMer Group, Business Development and Technology DirectorMer Group, LatAm Sales and Business Development

DirectorAJ Ingenieros Group, CEOBevtech USA, President CEOCamusat, Business ManagerCamusat, Regional Managing Director CALAGUZMAN NACICH, Sales Manageri engineering, Co-CEOi engineering, COOTORRES AJ PERU, CEOTower Engineering Solutions, ConsultantTower Engineering Solutions, PresidentTower Engineering Solutions, VP OperationsVialux, Operations ManagerZamil Infra, Business Development Zamil Infra, Vice President- International Sales

Mobile Network OperatorsDicotel, Senior representativeDigicel Group, CTODigicel Group, Operational Manager & Telecom Consultant ProfessionalEntel Peru, Gerente de Construcción e Infraestructura de Red - PeruOrange, Manager of Towerco Relationships and ContractsTrilogy International Partners, Group CTO

Regulator or GovernmentsMinisterio de Comunicaciones de Argentina, Secretaria de Promoción de Inversiones

Solution providersAbloy, General Manager Abloy Latin AmericaAbloy, Managing Director Abloy ColombiaAbloy, Managing Director Abloy MexicoAbloy, National Sales Manager Abloy USAAcsys, Americas Vice President SalesAcsys, Project ManagerAscot International, Area ManagerAscot International, CEOAscot International, Corporate Strategic AdvisorAscot International, SVP Business DevelopmentAusonia, CEOAusonia, Export Manager

Cambridge Clean Energy, CEOCorning, Regional Director, CALA WirelessCotech Tower Services, Senior RepresentativeCotech Tower Services, Senior RepresentativeErgos Energy, Managing PartnerFlash Technology, Director of Sales, International and AirportFlexenclosure, Regional Sales Director AfricaFlexenclosure, Vice President Sales and MarketingFluidicenergy, President Latin AmericaGreenPole Power Solutions, General ManagerGS Yuasa, Americas regional manager GS Yuasa, Regional Manager - AsiaHeliocentris, General Manager - AmericasHuawei Technologies Co., Huawei Wireless Site, PresidentHuawei Technologies Co., Marketing Operation DirectoriB Wave, Director of Sales, CALAInfratel Infraestrutura em Telecom, Business Development DirectorInfratel Infraestrutura em Telecom, PresidentInvendis, CEOInvendis, CTOInvendis, COOMetalogalva, Business Unit Manager - RenewablesMetalogalva, Business Unit Manager - TelecomNEPTUNO USA, CORP, Executive VPnexsysone, CEOnexsysone, VP Business Development - AmericasNorthStar, Business Advisor Latin AmericaNorthStar, SVP Business Development NorthStar, Vice President - Latin America & Caribbean NorthStar, Vice President – AmericasPlanetary Power, CEOPlanetary Power, VP ProductRedflow, Sales DirectorRedflow, Systems Integrator EngineerSeccional Brasil, CEOSiterra, An Accruent Product, Account ExecutiveSiterra, An Accruent Product, Senior Manager, Product Management and MarketingSolaris Technologies, CEOSolaris Technologies, CTO


How can I get involved?

To register your interest or to discuss sponsorship and exhibition opportunities at the TowerXchange Meetup Americas, contact:

Annabelle Mayhew, Chief Commercial OfficerE: [email protected]: +44 (0) 7423 512588

4th Annual TowerXchange Meetup Americas 20177-8 June 2017, Boca Raton Resort and Club, Boca Raton, Florida | www.towerxchange.com/meetup-americas

2017 sponsors and exhibitors

Reserved Reserved Reserved Reserved

Reserved

Reserved

Reserved

Reserved

16

15

14

13

12 11 10 Reserved

Provisional floorplan subject to change

106 companies represented in 2016 - make sure you join us in 2017!AbloyAcsysCorningAlpina Capital, LLCDelmec Engineering LtdFirst Corporate Finance AdvisorsMVP CapitalNau SecuritiesRBC Capital MarketsAnalysys MasonAscot InternationalAusoniaErgos EnergyFlexenclosureFluidicenergyGreenPole Power SolutionsHeliocentrisNorthStarPlanetary PowerRedflowGS YuasaCambridge Clean EnergyCotech Tower ServicesAdvanced Wireless CommunicationsAlfaSiteAmerican Tower CorporationAndean Tower PartnersBAI CommunicationsBalesia TowersBrazil Tower CompanyContinental Towers CorpDicotel, S.A. de C.V.EI Towers S.p.A.Eurasia TelecomEVEN TelecomGAFC TelecomGrupo TorreSur

Highline do BrasilHightel TowersInnovattel/TorresecIntelli Site SolutionsMexico Tower PartnersMX TowersNMSPhoenix Tower do BrasilPhoenix Tower InternationalQMC Telecom InternationalSBA CommunicationsSKYSITES Americas Southcom HoldingsSummit Wireless InfrastructureTELXIUSTerra TowersTorrecomTorres AndinasTorres Unidas ManagementTower 3 WirelessVertical BridgeWestchester Services Albright Capital ManagementASTEMCiti | Investment BankingCook Children’s Health Care SystemInternational Finance Corporation (IFC)Macquarie GroupMadison Dearborn PartnersPeppertree Capital Management, LLCRBC Capital MarketsScotiabankSilver Swan Capital

Soroban Capital PartnersSouthern Cross GroupTillman Global HoldingsUBSNorton Rose FulbrightPhillips Lytle LLPVinson & Elkins RLLPMer GroupAJ Ingenieros GroupBevtech USA,incCamusatGUZMAN NACICH S.A.I.C.i engineeringTORRES AJ PERUTower Engineering Solutions, LLCVialuxZamil InfraInside TowersDicotel, S.A. de C.V.Digicel GroupEntel PeruOrangeTrilogy International PartnersnexsysoneHuawei Technologies Co., LtdInfratel Infraestrutura em Telecom LTDAMinisterio de Comunicaciones de ArgentinaInvendisSiterra, An Accruent ProductiB WaveSmall Cell ForumMetalogalvaNEPTUNO USA, CORPSeccional Brasil S/ASolaris TechnologiesFlash Technology


How we promote TowerXchange Meetups

< The core of our promotional campaign is TowerXchange’s proprietary database of the top 35,000 decision makers in the global telecom tower industry< The TowerXchange database includes the management teams of 251 towercos who between them own 68% of the world’s 4.04mn towers< We also maintain relationships with over 3,000 CXOs and Heads of M&A, Network Planning, Procurement and Tower Strategy at MNOs worldwide< TowerXchange is read by 1,082 individuals at 511 investors, of which 116 have capital deployed in towers and is followed by 842 investment bankers and advisors< TowerXchange also maintains the world’s most exhaustive database of telecom infrastructure suppliers, from tower manufacturers, managed service providers, to RMS, site management platforms, access control and energy equipment and service providers< Every month TowerXchange adds an average of 700 new highly qualified members to our community through a combination of “pull” marketing via TowerXchange research, and P2P introductions and research within the tower industry< A total of 36 personalised emails with industry specific messaging were sent to our database to promote the TowerXchange Meetup Americas< Our email campaign is supported by a direct mail campaign to 300 selected VIPs, and by a courtesy calls to over 1,000 key target attendees< A unique feature of our marketing campaign is the TowerXchange Americas Dossier – this annual publication collates and updates critical baseline data and includes the best interviews conducted throughout the year with key CALA industry stakeholders< We use Google Adwords to amplify the findability of the dossier, and other selected industry news and analyses, attracting new, qualified members to our community

TowerXchange thanks its Americas media and association partners for their ongoing support:

< Analysys Mason

< BMI

< Inside Towers

< Latin America Monitor

< NATE


One of the strategic partner panels

Jim Eisenstein, Chairman and CEO, Grupo TorreSur

TowerXchange’s analysisof the independent tower market in CALA

As predicted, 2016 was hardly an eventful year for the CALA telecom tower industry. With many countries facing internal economic difficulties and dealing with foreign exchange challenges, the CALA tower industry has been experiencing a slowdown over the past couple of years and timid signs of recovery are just showing in selected markets.

Unsurprisingly, attention has now shifted to new dynamics and markets with Argentina attracting new and existing BTS firms as well as its very first deal (more details to follow). And while just over a year ago expectations were high with regards to the potential wave of towerco to towerco consolidation, the industry has witnessed only one deal of this kind in 2016 with NMS selling its Mexican, Colombian and Nicaraguan portfolios to Uniti Towers (formerly known as Summit LatAm).

There is consensus among various executives interviewed over the past few months that the industry isn’t likely to consolidate much further, at least for now and this is particularly true in countries like Brazil, where the forex crisis is imposing even more discipline on listed entities who aren’t likely to venture in any deal in the near future.

On a more positive note, these are the very few exciting events TowerXchange has tracked since the last issue of our Journal.

Argentina warms up

This is hardly surprising news since Argentina has

*American Tower

5,000 10,000 15,000 20,000 25,000 30,000 35,000

18,851

1,655900

328

Telesites 14,708

3,773

Dominican Republic

Ecuador

Argentina

Unknown

Spain & Germany

8,870

1,220 635

1,000**485

Estimated number of towers owned or managed by towercos in CALA

1000

800

1200

1400

1600

600

400

200

****

Continen

tal

Centen

nial

Torres

Unid

as

Mex

ico Tower

Partner

s

Uniti Tower

s

600

1531

205

450400

500

617

51

54

105 40 40

480

65

690 400

100

901

***Q

MC

1203

CSS

750

Brazil

Tower

Company

IIMT

Andean Tower

Partner

s

****

**In

novattel

(Torr

esec

)

200

100

Torres

Andin

as

Highlin

e

do Bra

sil

Torre

s Onlin

e

60

Torre

s de P

anam

a

202 150

Phoenix

Tower

700

Inter

national

Intel

li Site

Solutio

ns

AlfaSit

e

TOCSA

Skysit

es

Teleco

m Torr

es

34%

20%7%

31%

4%

4%

Crown Castle

American Tower

SBA Communications

Verizon

AT&T

Miscellaneous

Year Seller BuyerCountry Deal structureCost per tower US$Deal value US$Tower count

Portfolio acquisition

Company acquisition

Company acquisition

Company acquisition

SLB

Subsidiary acquisition

Company acquisition

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Partial acquisition

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

Partial acquisition

$185,185

$211,231

$321146

$179,897

$546,610

$321,375

$148,029

$238,896

$162,328

$305,732

$118,788

$138,665

$193,548

$283,126

$222,500

$213,576

$171,875

$131,799

$150,000

$172,043

$207,851

$208,904

$144,000

$85,607

$151,694

$878,378

$200,349

$1,200,000,000

$978,000,000

$527,000,000

$349,000,000

$129,000,000

$645,000,000

$413,000,000

$398,000,000

$343,000,000

$4,800,000,000

$251,000,000

$293,000,000

$18,000,000

$250,000,000

$178,000,000

$258,000,000

$33,000,000

$252,000,000

$225,000,000

$96,000,000

$323,000,000

$122,000,000

$18,000,000

$182,000,000

$206,000,000

$585,000,000

$8,272,000,000

130

190

529

529

6480

60

4630

1641

1940

236

2007

2790

1666

2113

15700

2113

2113

93

883

100

400

800

1208

192

1912

1500

558

1554

584

125

2126

1358

666

58267

SBA Communications

Phoenix Tower

Phoenix Tower

Phoenix Tower

American Tower

Phoenix Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

BR Towers

Grupo TorreSur

American Tower

American Tower

BR Towers

Torres Unidas

SBA Communications

Grupo TorreSur

American Tower

BR Towers

American Tower

American Tower

American Tower

American Tower

American Tower

American Tower

Grupo TorreSur

American Tower

Totals / average

Torresec

Amzak/Teletower

T4U

T4U

TIM

American Tower

BR Towers

Oi

Nextel

Z-Sites

Oi

Nextel

Nextel

Oi

GTP

Oi

Oi

Telefonica

Axtel

Sitesharing

Telefonica

Telefonica

Oi

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Millicom/Tigo

Telefonica

Sitesharing

Ecuador

Dominican Republic

Brazil

Brazil

Brazil

Panama

Brazil

Brazil

Brazil

Brazil

Brazil

Brazil

Mexico

Brazil

USA, Panama & Costa Rica

Brazil

Brazil

Brazil

Mexico

Brazil

Chile

Brazil

Brazil

Brazil

Brazil

Brazil

Chile

Mexico

Mexico

Colombia

Colombia

Brazil

Brazil

2015

2015

2015

2015

2014

2014

2014

2014

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2012

2012

2012

2012

2012

2012

2012

2011

2011

2011

2011

2011

2011

13,350Telxius

Grupo TorreSur 6,500

SBA Communications 7,131 548 239619 408617 146 121 21

216

591

79

138

4032

208

221

213

Torrec

om

100

*American Tower

5,000 10,000 15,000 20,000 25,000 30,000 35,000

18,851

1,655900

328

Telesites 14,708

3,773

Dominican Republic

Ecuador

Argentina

Unknown

Spain & Germany

8,870

1,220 635

1,000**485


1000

800

1200

1400

1600

600

400

200

****

Continen

tal

Centen

nial

Torres

Unid

as

Mex

ico Tower

Partner

s

Uniti Tower

s

600

1531

205

450400

500

617

51

54

105 40 40

480

65

690 400

100

901

***Q

MC

1203

CSS

750

Brazil

Tower

Company

IIMT

Andean Tower

Partner

s

****

**In

novattel

(Torr

esec

)

200

100

Torres

Andin

as

Highlin

e

do Bra

sil

Torre

s Onlin

e

60

Torre

s de P

anam

a

202 150

Phoenix

Tower

700

Inter

national

Intel

li Site

Solutio

ns

AlfaSit

e

TOCSA

Skysit

es

Teleco

m Torr

es

34%

20%7%

31%

4%

4%

Crown Castle

American Tower

SBA Communications

Verizon

AT&T

Miscellaneous



Company acquisition

Company acquisition

Company acquisition

SLB


Company acquisition

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Partial acquisition

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

Partial acquisition

$185,185

$211,231

$321146

$179,897

$546,610

$321,375

$148,029

$238,896

$162,328

$305,732

$118,788

$138,665

$193,548

$283,126

$222,500

$213,576

$171,875

$131,799

$150,000

$172,043

$207,851

$208,904

$144,000

$85,607

$151,694

$878,378

$200,349

$1,200,000,000

$978,000,000

$527,000,000

$349,000,000

$129,000,000

$645,000,000

$413,000,000

$398,000,000

$343,000,000

$4,800,000,000

$251,000,000

$293,000,000

$18,000,000

$250,000,000

$178,000,000

$258,000,000

$33,000,000

$252,000,000

$225,000,000

$96,000,000

$323,000,000

$122,000,000

$18,000,000

$182,000,000

$206,000,000

$585,000,000

$8,272,000,000

130

190

529

529

6480

60

4630

1641

1940

236

2007

2790

1666

2113

15700

2113

2113

93

883

100

400

800

1208

192

1912

1500

558

1554

584

125

2126

1358

666

58267

SBA Communications

Phoenix Tower

Phoenix Tower

Phoenix Tower

American Tower

Phoenix Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

BR Towers

Grupo TorreSur

American Tower

American Tower

BR Towers

Torres Unidas

SBA Communications

Grupo TorreSur

American Tower

BR Towers

American Tower

American Tower

American Tower

American Tower

American Tower

American Tower

Grupo TorreSur

American Tower

Totals / average

Torresec

Amzak/Teletower

T4U

T4U

TIM

American Tower

BR Towers

Oi

Nextel

Z-Sites

Oi

Nextel

Nextel

Oi

GTP

Oi

Oi

Telefonica

Axtel

Sitesharing

Telefonica

Telefonica

Oi

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Millicom/Tigo

Telefonica

Sitesharing

Ecuador

Dominican Republic

Brazil

Brazil

Brazil

Panama

Brazil

Brazil

Brazil

Brazil

Brazil

Brazil

Mexico

Brazil


Brazil

Brazil

Brazil

Mexico

Brazil

Chile

Brazil

Brazil

Brazil

Brazil

Brazil

Chile

Mexico

Mexico

Colombia

Colombia

Brazil

Brazil

2015

2015

2015

2015

2014

2014

2014

2014

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2012

2012

2012

2012

2012

2012

2012

2011

2011

2011

2011

2011

2011

13,350Telxius



216

591

79

138

4032

208

221

213

Torrec

om

100

*American Tower

5,000 10,000 15,000 20,000 25,000 30,000 35,000

18,851

1,655900

328

Telesites 14,708

3,773

Dominican Republic

Ecuador

Argentina

Unknown

Spain & Germany

8,870

1,220 635

1,000**485


1000

800

1200

1400

1600

600

400

200

****

Continen

tal

Centen

nial

Torres

Unid

as

Mex

ico Tower

Partner

s

Uniti Tower

s

600

1531

205

450400

500

617

51

54

105 40 40

480

65

690 400

100

901

***Q

MC

1203

CSS

750

Brazil

Tower

Company

IIMT

Andean Tower

Partner

s

****

**In

novattel

(Torr

esec

)

200

100

Torres

Andin

as

Highlin

e

do Bra

sil

Torre

s Onlin

e

60

Torre

s de P

anam

a

202 150

Phoenix

Tower

700

Inter

national

Intel

li Site

Solutio

ns

AlfaSit

e

TOCSA

Skysit

es

Teleco

m Torr

es

34%

20%7%

31%

4%

4%

Crown Castle

American Tower

SBA Communications

Verizon

AT&T

Miscellaneous



Company acquisition

Company acquisition

Company acquisition

SLB


Company acquisition

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Company acquisition

SLB

SLB

SLB

SLB

Partial acquisition

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

SLB

Partial acquisition

$185,185

$211,231

$321146

$179,897

$546,610

$321,375

$148,029

$238,896

$162,328

$305,732

$118,788

$138,665

$193,548

$283,126

$222,500

$213,576

$171,875

$131,799

$150,000

$172,043

$207,851

$208,904

$144,000

$85,607

$151,694

$878,378

$200,349

$1,200,000,000

$978,000,000

$527,000,000

$349,000,000

$129,000,000

$645,000,000

$413,000,000

$398,000,000

$343,000,000

$4,800,000,000

$251,000,000

$293,000,000

$18,000,000

$250,000,000

$178,000,000

$258,000,000

$33,000,000

$252,000,000

$225,000,000

$96,000,000

$323,000,000

$122,000,000

$18,000,000

$182,000,000

$206,000,000

$585,000,000

$8,272,000,000

130

190

529

529

6480

60

4630

1641

1940

236

2007

2790

1666

2113

15700

2113

2113

93

883

100

400

800

1208

192

1912

1500

558

1554

584

125

2126

1358

666

58267

SBA Communications

Phoenix Tower

Phoenix Tower

Phoenix Tower

American Tower

Phoenix Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

American Tower

SBA Communications

American Tower

BR Towers

Grupo TorreSur

American Tower

American Tower

BR Towers

Torres Unidas

SBA Communications

Grupo TorreSur

American Tower

BR Towers

American Tower

American Tower

American Tower

American Tower

American Tower

American Tower

Grupo TorreSur

American Tower

Totals / average

Torresec

Amzak/Teletower

T4U

T4U

TIM

American Tower

BR Towers

Oi

Nextel

Z-Sites

Oi

Nextel

Nextel

Oi

GTP

Oi

Oi

Telefonica

Axtel

Sitesharing

Telefonica

Telefonica

Oi

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Telefonica

Millicom/Tigo

Telefonica

Sitesharing

Ecuador

Dominican Republic

Brazil

Brazil

Brazil

Panama

Brazil

Brazil

Brazil

Brazil

Brazil

Brazil

Mexico

Brazil


Brazil

Brazil

Brazil

Mexico

Brazil

Chile

Brazil

Brazil

Brazil

Brazil

Brazil

Chile

Mexico

Mexico

Colombia

Colombia

Brazil

Brazil

2015

2015

2015

2015

2014

2014

2014

2014

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2013

2012

2012

2012

2012

2012

2012

2012

2011

2011

2011

2011

2011

2011

13,350Telxius



216

591

79

138

4032

208

221

213

Torrec

om

100


Source: TowerXchange research, quarterly filings, site lists

* American Tower’s Brazil count is pro rata to the closing of the last tranche of TIM Brasil towers** 1,000 urban wireless sites and 2,500km of fibre*** QMC has a portfolio of 901 towers across Brazil, Mexico, Colombia and Puerto Rico**** Continental Towers owns a portfolio of ~690 towers, which their website claims are distributed across Mexico, Dominican Republic, Jamaica, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Colombia and Peru***** Innovattel/Torresec owns a portfolio of 500 towers across Puerto Rico, Colombia, Ecuador, Argentina, Panama and Peru


been high on the agenda of tower executives for quite some time now. But finally, TowerXchange is able to report on the very first deal in the country as well as several new BTS entities.

With regards to BTS firms, we’ve recently added two new companies to the list of known entities operating in the country. Namely, Plata Tower Company, headed by Alex Sepehri-Nik (one of the co-founders of Brazil Tower Company and Arqueiro Telecom) and Teletower Argentina. TowerXchange has already spoken with Alex regarding its Argentinian venture and the full interview can be found later in this Journal. On the other hand, Teletower Argentina is a “new finding” for us and we’ve gathered that it’s a strategic alliance between GSM Network Services, a local company involved in site acquisition, and Teletower, which has been involved in deployments across various CALA countries including the Dominican Republic, Peru, Colombia, Nicaragua and Mexico.

TowerXchange has recently tracked American Tower’s very first deal in Argentina and we could not be more excited! American Tower has announced the acquisition of Comunicaciones y Consumos, SA (CyCSA), an engineering firm active in the local telecom industry. According to the deal, AMT has acquired 1,000 urban wireless sites, 2,500km of fibre optic network as well as the rights to deploy telecom infrastructure in several municipalities.

With this deal, American Tower officially enters the Argentinean telecom sector and while there are still

Estimated total towers in rest of South America: 17,900 (Venezuela, Ecuador, Bolivia, Paraguay, Uruguay, Surinam, French Guiana and Guyana)

Selected estimated CALA tower counts

Latest towerco findings in the CALA market

Teletower Argentina

Plata Tower Company

Aplicanet

Name

Argentina

Argentina

Ecuador

Countries

BTS

BTS

BTS

Focus

Source: TowerXchange

Brazil 54,751

Mexico 29,069

Argentina 16,000

Colombia 15,399

CentralAmerica11,983

Caribbean10,550

Peru 9,167

Chile8,640



Major tower transactions in Latin America 2011/2016


Portfolio acquisitionCompany acquisitionPortfolio acquisitionPortfolio acquisitionPortfolio acquisitionPortfolio acquisitionPortfolio acquisitionCompany acquisition

SLBCompany acquisition

SLBSubsidiary acquisitionCompany acquisition

SLBSLB

Company acquisitionSLBSLBSLBSLB

Company acquisitionSLBSLBSLBSLB

Partial acquisitionSLBSLBSLBSLBSLBSLBSLBSLBSLBSLBSLBSLBSLB

Partial acquisition

$181,058

$35,061$129,305

$128,000

$185,185

$211,231$321146$179,897$546,610$321,375$148,029$238,896$162,328$305,732$118,788$138,665$193,548$283,126

$222,500$213,576$171,875$131,799$150,000$172,043$207,851$208,904$144,000$85,607

$151,694$878,378

$199,966

$65,000,000

$11,500,000$214,000,000

$16,000,000

$1,200,000,000

$978,000,000$527,000,000$349,000,000$129,000,000$645,000,000$413,000,000$398,000,000$343,000,000

$4,800,000,000$251,000,000$293,000,000$18,000,000

$250,000,000

$178,000,000$258,000,000$33,000,000

$252,000,000$225,000,000$96,000,000

$323,000,000$122,000,000$18,000,000

$182,000,000$206,000,000$585,000,000

$8,353,000,000

359 1,000*

545900328

1655130190125529

648060

463016411940236

2007279016662113

1570021132113

93883100350400800

1208192

19121500558

1554584125

21261358666

44,726

Uniti TowersAmerican TowerPhoenix Tower

TelxiusTelxiusTelxius

SBA CommunicationsPhoenix Tower

Highline do BrasilPhoenix Tower

American TowerPhoenix Tower

American TowerSBA Communications

American TowerAmerican Tower

SBA CommunicationsAmerican TowerAmerican Tower

SBA CommunicationsAmerican Tower

BR TowersGrupo TorreSurAmerican TowerAmerican Tower

BR TowersTorres UnidasTorres Unidas

SBA CommunicationsGrupo TorreSurAmerican Tower

BR TowersAmerican TowerAmerican TowerAmerican TowerAmerican TowerAmerican TowerAmerican TowerGrupo TorreSurAmerican Tower

Totals / average

NMS Comunicaciones y Consumos

VivaTelefónicaTelefónicaTelefónicaTorresec

Amzak/TeletowerAlgar Telecom

T4UTIM

American TowerBR Towers**

OiNextelZ-Sites

OiNextelNextel

OiGTP***

OiOi

TelefónicaAxtel

SitesharingTelefónicaTelefónicaTelefónica

OiTelefónicaTelefónicaTelefónicaTelefónicaTelefónicaTelefónicaTelefónica

Millicom/TigoTelefónicaSitesharing

Mexico, Colombia, NicaraguaArgentina

Dominican RepublicPeruChileBrazil

EcuadorDominican Republic

BrazilBrazilBrazil

PanamaBrazilBrazilBrazilBrazilBrazilBrazil

MexicoBrazil

USA, Panama & Costa RicaBrazilBrazilBrazil

MexicoBrazilPeruChileBrazilBrazilBrazilBrazilBrazilChile

MexicoMexico

ColombiaColombia

BrazilBrazil

2016201620162016201620162015201520152015201420142014201420132013201320132013201320132013201320132013201320122012201220122012201220122012201120112011201120112011

Special thanks to Jonathan Atkin, Managing Director at RBC Capital Markets for his contribution

* 1,000 urban wireless sites and 2,500km of fibre **American Tower acquisition of 4,630 BR Towers includes 2,530 towers plus 2,100 exclusive rights ***Totals and average exclude the GTP / American Tower deal as it was US-centric

* 1,000 urban wireless sites and 2,500km of fibre


as many as 16,000 towers in the hand of local MNOs and the potential for sale and leaseback (SLB) is still compromised by practical issues such as taxation, TowerXchange believes we’ll soon see further movements by the likes of SBA Communications and maybe even Phoenix Tower International.

NMS-Uniti Towers deal

In the midst of a generally slow year, NMS defeated all odds and sealed a deal with another towerco in what is effectively one of the very few tower deals of 2016.

On 14 November 2016, CS&L, a U.S. based REIT which owns 4.2mn fibre strand miles (6.76mn km), 86 wireless towers, and other communications real

Who sold their towers in Central and South America?

estate throughout the United States and Mexico, announced the purchase of 359 towers from NMS for a total value of US$65mn.

The towers are spread across Mexico, Colombia and Nicaragua and have been acquired by CS&L’s LatAm subsidiary, Uniti Towers (formerly known as Summit LatAm). In Mexico, Uniti Towers acquired 205 sites (and 108 under development) with annual revenue of US$3.5mn, TCF margin around 54% and a tenancy ratio of 1.13x. In Colombia, the towerco has bought 100 towers (and five under development) with annual revenue of US$1.6mn, TCF margin around 52% and a tenancy ratio of 1.10x. Lastly, the deal included 54 existing sites and one under development in Nicaragua, with annual revenue summing up to US$1.2mn, TCF margin at

80% and a higher tenancy ratio of 1.31x.

The existing portfolio of 359 sites includes about 194 ground based towers (54% of the entire portfolio) and 165 rooftops (46%), while the percentage of rooftops is expected to grow to 48% once the sites under development are built (taking the total portfolio up to 473 sites).

A new move in the Oi saga

TowerXchange has previously reported that billionaire Naguib Sawiris was in talks with a group of Oi’s bondholders to jointly present a new restructuring plan for the carrier and on 19 December, the plan was eventually submitted.

According to the plan, Oi would raise US$1.25bn in capital via an IPO while Sawiris would provide US$250mn. Additionally, the plan would require US$24.8bn of Oi’s debt to be swapped for 95% of the carrier’s equity while the rest of the debt (US$5.8bn) would be exchanged for new bonds.

Sawiris has recently stated that Oi would need to spend as much as US$11bn over the next five years in order to upgrade its network and stay competitive. Additionally, he announced that depending on the success of his plans, he would completely revamp Oi’s governance with a new board of directors to include four independent members.

For now, the plan is with Oi for review and it will be then shared with the various judicial bodies


AMT, Centennial, IIMT, Intelli Site, MTP, MX Towers, Uniti Towers, QMC, Rent-A-Tower, Telesites, Torrecom

Balesia, Continental, SBA, Torrecom

AMT, ATP, Andinas, Balesia, Innovattel, NMS, Unidas

AMT, Balesia, Unidas

Aplicanet, Balesia, Innovattel, SBA

Balesia, Continental

Balesia, Continental, SBA

Balesia, SBA, Torrecom

AMT, Balesia, Catalina, PTI, SBA, TOCSA

Continental, Innovattel, SBA

AMT, ATP, Andinas, Centennial, Golden Comunicaciones, Innovattel, Uniti Towers, PTI, QMC, Unidas

AMT, AlfaSite, BTC, CSS, Centennial, GTS, Highline, PTI, QMC, SBA, Skysites

American Tower, Innovattel, Plata Tower Company, Teletower Argentina, Tower 3

Continental

PTI


Towercos have acquired the majority of towers from carriers

Towercos have acquired a significant proportion of towers

from carriers, but the majority remain carrier-owned.

Significant BTS towerco activity also present

Less SLB activity, but plenty of BTS towerco activity

Early stage market for BTS and/or SLB

Negligible towerco activity

Legend



Breakdown of ownership of CALA’s 164,207 telecom towers, Q4 2016

American TowerTelesitesSBA CommunicationsGrupo TorreSurTelxiusOther independent towercosOperator-captive

14924

34834

9850

6500

12216

83000

2883

Mexico - Estimated tower count 29,069


Telesites

American Tower

Mexico Tower Partners

IIMT

Centennial

Torrecom

Intelli Site Solutions

Other independent towercos including Conex

(QMC), and MX Towers

Uniti Towers

Estimated MNO captive towers

450400

208202

14,708

8870

1531

495 205~2000

involved. TowerXchange will continue to report on Oi and its path towards recovery.

Mexico

Shying away from Mexico is almost impossible. TowerXchange is constantly drawn by its dynamics and changing scenarios, even if we consider the tower market over populated.

The creation of Telesites, América Móvil’s spin-off, represents a new phase for the local industry with two towercos, Telesites and American Tower, leading the pack in the Build-to-Suit race thanks to their alliances with respectively América Móvil and AT&T.

In spite of a relatively weak demand and a third player - Telefónica - reluctant to commit to any growth plan and uncertain plans from AT&T, Telesites has managed to add over 2,800 sites to its portfolio since its launch. And Telesites is already expanding beyond Mexico with a portfolio of over 200 sites in Costa Rica. Market analysts have been cautious at predicting site needs in Mexico and have forecasted no more than 5,000 additional co-locations by 2020, a factor that could dampen the tenancy ratio growth expectations of Telesites, American Tower and the wide array of middle market towercos including Mexico Tower Partners, Torrecom, IIMT and Intelli Site Solutions.

With the sale of NMS’ portfolio to Uniti Towers, Mexico is now home to a new entity with a U.S. legacy and TowerXchange hopes to speak to Uniti


Costa Rica - Estimated tower count 3,163

El Salvador - Estimated tower count 1,264



SBA

American Tower

Continental Towers

Telesites

PTI

TOCSA

ICE

Claro

450

485

~1000

180

216138105

SBA

Continental Towers

Tigo

Claro

Digicel

Telefónica

239

400300

250~25

50

619

Towers’ staff in the near future for some insights into the towerco plans!

The government has recently announced the winning consortium of the wholesale LTE 700MHz network. The winner is the Altan consortium which was also the only group running for the deal since the other consortium - Rivada Networks - was disqualified and has since appealed the decision. The Altan consortium is led by three funds owned by the World Bank, Morgan Stanley and Eugenio Galdon of Grupo Multitel, a Spanish cable supplier.

According to the deal, Altan will obtain subsidised access to the 700MHz spectrum as well as a 20-year public-private partnership (PPP) to deploy as well as operate the network which is expected to cost approximately US$7bn.

Central America and the Caribbean

Belize has 359.6K connections and 99% penetration rate as of Q4 2015 according to GSMA Intelligence. With two carriers, DigiCell and Smart, and no active towercos to date, the country has a long way to go to reach regional standards and our estimates suggest there are approximately 70-80 towers in the national territory.

Costa Rica is the first country beyond Mexico where Telesites is pursuing its expansion beyond Mexico. In fact, Claro has recently assigned a 300-tower BTS project to the Mexican towerco. Telesites will be the sixth towerco in this 3,163 tower market, joining market leaders SBA and American Tower,


Honduras - Estimated tower count: 1,200


200

Operator captive towers

Continental Towers

~1000

~200

SBA

Torrecom

Continental Towers

Tigo

Claro

Telefónica


617

221

~100

~2000

500

200

Guatemala - Estimated tower count: 3,639 Continental Towers, TOCSA and recent entrants PTI. Since liberalising the market back in 2008, the Costa Rican market has grown into a stable business environment with relatively good growth potential and a modern regulatory system. In a further attempt to improve the local telecom sector, the Coordination Commission for the Installation or Expansion of Telecommunications Infrastructure (CCIAIT) has recently presented its first Action Plan for Telecoms Infrastructure which aims, among other goals, at creating a record of all telecoms infrastructure of the country, which would be the first of this kind in the region.

Cuba had a population of 11.4mn and 3.3mn mobile connections at the end of 2015, giving a mobile penetration of just 29%, up 6% YOY. Over the past twelve months, diplomatic relations between the U.S. and Cuba have been reinstated and there have been an increased ability to transact between the two countries.

TowerXchange is keeping a close eye on the island in light of its untapped market and undisputed potential to become a target of international towercos. In terms of towers, Cuba holds approximately 500-700 sites which are currently being shared by radio companies, TV stations and ETECSA, which to date is the only operator active in the country.

Innovattel/Torresec has recently participated to Informática 2016, the IT and telecom forum held in Havana, Cuba. Discussing with TowerXchange on the potential of the Cuban telecom industry to open


SBA

Torrecom

Uniti Towers

Claro

Telefónica

SBA

Continental Towers

PTI

Torres de Panama

Cable & Wireless

Claro

Telefónica

Nicaragua - Estimated tower count: 1,025

Panama - Estimated tower count: 1,567



408

21354

300

50

548

79

90

60

550

150

~100

up to new MNOs and, as a result, to towercos, they commented that there’s still quite a way to go before the Cuban government makes a move towards liberalising the market. However, the change is likely to happen sometime over the next couple of years.

The Dominican Republic has been the target of Phoenix Tower International which grew its local portfolio from zero to 735 sites in less than a year. PTI has first acquired local towerco Teletower Dominicana and its 190 towers and lately added 545 sites by closing a deal with Viva, the third carrier of the country, at the time owned by Trilogy International Partners. Along with the transaction, Trilogy sold Viva to local media company Telemicro Group, owned by businessman Juan Ramon Gomez Diaz.

At the end of 2013, the mobile industry became a three-way game between Claro, Orange and Viva, since Orange and Tricom were both acquired by Altice, a cable and telecoms investor from Luxembourg.

Given the presence of four creditworthy tenants, it is perhaps surprising that El Salvador is the least penetrated tower market in Central America at 17%. SBA Communications and Continental Towers appear to be the only towercos active in El Salvador, SBA having acquired the majority of Telefónica’s sites.

Guatemala is a complex country with a very competitive tower industry. SBA Communications,


Bolivia: fast facts

Population10.8mn (Q4 2015)

Economy

Mobile sector Carriers

$$$$$$$$$$$$$$$$$$

$$$

Foreign investmentsUS$2.1bn (2014)

Poverty headcountratio 39.3% (2014)

Fitch ratingBB/Stable

(July 2015)

98% SIM penetration(Q4 2015)

Connections 106mn(Q4 2015)

Entel

Tigo

Viva

Inflation 4.9% (2016E)

49.6%

30%

23.1%

towerco, Balesia, which would be the second one to operate in the country in addition to Continental Towers Corp. For now, there’s been little visibility on the local industry and its potential with around 20% towerco penetration and the two carriers – Tigo and Claro – still holding on to their tower portfolios.

Nicaragua is a country where the perceived operational and country risks may be higher than the actual ones. Four towercos including SBA and Torrecom operate in the country and to date, most of their activity is focused on BTS since

the inventory of available portfolios is scarce. In fact, Telefónica has sold most of its assets to SBA Communications, Claro retains approximately 300 towers which could be transferred to Telesites in the future and the third operator Xinwei hasn’t started operating yet in spite of its announcements this past January.

Panama holds its place in the regional tower game since the acquisition by Phoenix Tower International of 60 sites from American Tower. SBA remain market leaders with smaller portfolios held by Continental Towers and Torres de Panama. According to GSMA Intelligence, Panama is a fast grower market in Central America with four active carriers (Cable & Vision, Claro, Digicel and Movistar), 148% penetration rate and 5.9mn mobile connections.

The rest of the Caribbean has been very quiet in terms of towerco activity. I believe that Cuba and the Dominican Republic could represent interesting starting points for towercos looking at entering this highly fragmented collection of markets, and Phoenix Tower International with its recent acquisitions and Innovattel with its eye on Cuba seem ahead of the competition.

Bolivia

Still a virgin market in terms of towerco penetration, Bolivia is a complex country to do business in. However, with three active operators all planning to make considerable investments to upgrade their networks and enhance the quality

Torrecom, Balesia and Continental all operate in the local market which is characterised by a fairly strong regulatory environment and the huge influence of local communities – Consejos Comunitarios de Desarrollo Urbano y Rural (COCODES) – in the approval of new deployments. Local billionaire Mario Lopez owns substantial equity in market leaders Tigo, and also owns most of the land under their towers, which makes the operator reluctant to participate in widespread infrastructure sharing.

Honduras might soon see the entrance of a second


American TowerCentennialTorres AndinasPhoenix Tower InternationalOther independent towercos including Innovattel, Continental Towers, Balesia, Andean Tower Partners, Torres Unidas and Golden ComunicacionesUniti TowersSBAEstimated MNO captive towersAmérica Móvil Telefónica Millicom

Telxius

American Tower

Torres Unidas

Torres Andinas

NMS

Innovattel

Phoenix Tower international

Claro

Telefónica

Bitel

Entel

Colombia - Estimated tower count: 15,399

Peru - Estimated tower count: 9,167

Source: TowerXchange, Company reports, RBC Capital Markets estimates


900

6500

2000

1800

3773

6520040

10021

900

635

600

1358

6002500

2342

100505032

of their infrastructure, BTS firms could consider making a move in the near future.

Specifically, dominant player Entel has recently announced a US$1bn five year investment plan which will focus mainly on enhancing the quality of mobile infrastructure and ensuring coverage of rural communities. Tigo invested US$130mn to expand its infrastructure across the country and Viva committed to US$80mn in 2015.

The Andean States

In just over a year, TowerXchange came across at least a dozen towercos operating in Colombia, the most recent of which is a joint venture between Innova Capital Partners and Goldman Sachs, Golden Comunicaciones. And SBA Communications has entered the country too and now owns 21 sites in Colombia.

Of the 15,399 towers in Colombia, 67% are still in the hands of carriers with Claro owning approximately 6,500 sites and Telefónica 2,000.

Interestingly, both companies have created spin-offs and it’s yet to be seen whether their portfolios will eventually be transferred to Telesites and Telxius, hence reducing the chance of any further sale and leaseback opportunity in the country.

The announced 700MHz auction is yet to take place in spite of being announced back in Q2 2015 and to date and local news outlets suggest that the process should be completed in the coming months. And


while local carriers still perceive their towers as a competitive differentiator, the lack of a strong regulatory environment doesn’t necessarily favour the infrasharing model.A National Law designed to ease permitting in Colombia reportedly has not prevented local government from closing sites. And Tigo, Movistar and ETB are sharing their 4G rollout, with roaming agreements in place, which will dampen tenancy demand. However Avantel and DirecTV, with the potential of AT&T investment represent significant upside to tenancy ratio models.

Possibly the quietest of all Andean States, Ecuador has seen the development of its tower

American Tower

Torres Unidas

Telxius

Other independent towercos

SBA

Estimated MNO captive tower

América Móvil Telefónica

Entel Chile Fourth MNO

Chile - Estimated tower count: 8,640

Source: TowerXchange, Company reports, RBC Capital Markets estimates

~120

23611000

3000

10121

1220

480

328

market considerably suppressed in light of Claro’s dominant position. The recent acquisition of Innovattel/Torresec’s 130 towers by SBA Communications hints that the latter might be looking at developing its presence in the country but to date, we are yet to see other towercos active in Ecuador. In fact, Torres Andinas has so far been focusing on Peru and Colombia while Andean Tower Partners is planning a market entry during Q1 2017.

Peru is one of the most interesting countries in the entire CALA landscape, and is a market which is being heavily colonised by towercos. With a total tower count just under 10,000 sites, it’s also one of

the least penetrated tower markets in the region with towercos owning 24% of sites. In Q1 2016, Telefónica transferred 900 sites to Telxius and it would be interesting to see if Claro follows the same path and opens the door to Telesites in the country.

Local sources still suggest that the country might be up for big changes which could considerably reshape the dynamics of the tower industry. In fact, Peru could be the first country to regulate the towerco sector, hence reducing the freedom of action of towercos in terms of prices, conditions and overall business strategy.

Peru’s Ministry of Transport and Communications has called for an increase from their current 9,167 to 22,000 cell sites over the next three years, an increase of almost 2.5x in tower stock. In order to ease the notoriously complex permitting regime, the Congress passed Law N. 29022 back in 2015 which introduced, among other things, the tacit approval of permit requests after thirty days from the initial demand.

Chile has seen its attractiveness to towercos considerably reduced as a result of Law No. 20.599, also known as the Towers Law, which has suppressed the local BTS market with its onerous restrictions on building in saturated or sensitive areas, its somewhat heavy handed attempt to mandate infrastructure sharing, and its requirements to invest in camouflage, at times compensating local communities.

However, the country still presents a certain degree


American Tower

SBA Communications

Grupo TorreSur

Telxius


Remaining big 4 operators

Other operators including Nextel, Sky Brasil,

Algar Telecom, Sercomtel and ON Telecom

Brazil - Estimated tower count: 54,751


Brazilian independent towercos

18851

71386500

4607

15000

4607

1655


CSS

Phoenix Tower do Brasil

Brazil Tower Company

Centennial

Highline do Brasil

AlfaSite

Torres Online

Skysites

Telecom Torres

Allowance for other small towercos1203

700

750400

1000

150 514040

100

of opportunity for acquisitive towercos. In fact, of its 8,640 towers, less than 2,000 are currently in the hands of towercos. It must be noted though that with Telefónica and Claro both active in the country, the possibilities for independent towercos to acquire assets are limited to Entel. In fact, Telefónica has already transferred its 328 sites to Telxius during Q1 2016, although it is not clear whether that figure represents all Telefónica’s towers in the country.

In 2015, Entel, Movistar and Claro all started using the 700MHz frequency for their 4G LTE networks, following the 2014 spectrum auction which included with extra coverage obligations including connecting 1,281 remote regions, leading BMI to project that Chile’s carriers would need three to four times as many towers.

Interestingly, SBA Communications has reported a tower count of 121 sites in Chile in Q3 2016 and TowerXchange will soon look for further insights into the towerco’s entrance in the country!

Brazil

A deep recession combined with associated forex crisis and a less than rosy political landscape have dragged Brazil back into the news for all the wrong reasons. No more talks about BRICs, exploding GDPs, generous investment in infrastructure for major sporting events, and a flourishing economy any more. But we must always keep in mind that Brazil needs thousands of towers to bring its network up to par with other developed markets. With close to 5,000 subscribers per site, the potential for towercos


to deploy hundreds of greenfield projects in the country remains, but currently there is very little new build going on in the country, with carriers shying away from new projects and investments.In the midst of this challenging phase, the market might be up for some fundamental restructuring with both TIM and Nextel reportedly being up for sale. And while consolidation among carriers seem more likely, the tower market is at a standstill, with middle market towercos struggling to achieve an exit that meets their investors’ ROIs expectations.

Carveouts seem more in fashion than SLB these days and Telxius – via its subsidiary Towerco Latam Brasil – has already acquired 1,655 sites from Telefónica. And the real game changer could be América Móvil in the case it decides to transfer its 8,500 towers to Telesites, hence creating the second

Paraguay baseline data (Q4 2015)

Source: GSMA IntelligenceUruguay baseline data (Q4 2015)

Source: GSMA Intelligence

116%

159%

SIM penetration

SIM penetration

Population6.7mn

Population3.4mn

Connections7.7mn

Connections5.5mn

largest towerco in the Brazilian market.

In H2 2016, towercos reported a timid recovery and a slow return to “business as usual” with new search rings being issued and a higher level of spending by the mobile network operators. As previously discussed though, the bankruptcy of Oi further contributed to shaking up the market and TowerXchange doesn’t expect things to be solved before the end of H1 2017.

Paraguay and Uruguay

Paraguay and Uruguay are virgin markets but we are keeping an eye on their potential to open up to the tower industry.

Specifically, Paraguay is host to four operators,

namely Millicom’s Tigo, Telecom Argentina’s Personal, América Móvil’s Claro and state-owned Copaco, trading as Vox, who are currently committing to considerable investments to upgrade their networks, a scenario which might create the right conditions for towercos to make a move into the country.

Uruguay offers another enticing telecom landscape with state-owned Antel actively competing with Movistar and Claro and could be another interesting target for towercos looking at new markets to colonise.

To date, TowerXchange is tracking one active towerco in the country – Uruguay Torres – of which we have very little information.

Argentina

Last but not least, Argentina is the next big thing and what a few months ago was just speculation about its potential is now turning into action. In fact, while the new Government is pushing to put Argentina back on the map of international relations, the country does present an ideal scenario in terms of its telecom industry and cell site densification needs.

Local experts suggests that of the (less than) 16,000 towers built in the country, as low as 12,000 are actually active and with an average of 4,500 subscribers per site, Argentina needs as many as 40,000 but at least 20,000 new sites in the near term, entailing investments of as much as US$3bn.


140%

SIM penetration

1,500-2,000new sites neededper year 2016-2018

16,000existing towersin Argentina

US$2.2bn:Raised during the 2014

4G spectrum auction

$$$$

US$9bn:expected combinedMNOs investmentsin the next five years

$$$$

35%

Incometax rate

VAT

21%

Wealthtax

1%

4:known BTSfirms activein Argentina

US$7+averageARPU

32-33%:the marketshare of eachof the threetop MNOs

the newregulatorENACOMresultingfrom themerge of

AFSCA

andAFTIC

1

1: deal sealedin the country(AMT-CyCSA) in 2016

2013

2014

2015

2016 to date

Year

140,000

148,000

156,000

164,207

46,011

61,729

69,850

81,207

Est. total towers Towers owned by towercos

32%

41%

44%

49%

Towerco penetration

The evolution of the CALA telecom tower industry 2013-2016


Argentina: fast factsThe country still presents many challenges for international businesses looking at making a move. From inflation all the way to permitting, towercos willing to enter the market do need to juggle many challenges and contribute to the definition of rules and regulations from scratch. But this could be a positive factor for entrepreneurial towercos looking at making their way in what could become the most attractive new tower market in CALA.

Argentina’s new government is committed to making the country an attractive destination for international investors, and local authorities within the telecom sector are currently engaging with TowerXchange to present Argentina and its market potential to the tower industry.

As previously discussed, the recent AMT deal with CyCSA as well as the entrance of a couple of new BTS firms into the country suggest that Argentina is heating up fast. And TowerXchange hopes to report on some exciting new developments in Argentinian towers in 2017!

Conclusions: CALA towercos reach 50% penetration

It might not be the fastest growing tower industry we analyse nor the most active in terms of deals but the CALA tower market is still expanding! In fact, thanks to the latest developments in terms of both organic and inorganic growth, towercos now now own almost half of CALA’s 164,380 towers. And with several virgin markets such as Argentina offering plenty of opportunities for SLB - if and when the tax


The fourth edition of the TowerXchange Meetup Americas is taking place 7-8 June 2017 in Boca Raton, Florida and further information can be found on the TowerXchange website:www.towerxchange.com/meetup/meetup-americas

regime allows it - and still over 80K sites in the hand of carriers across the region, TowerXchange expects to witness further expansions in the towerco model from Mexico down!

What’s left to analyse is how much this level of penetration will be dependent on carve-out towercos such as Telxius and Telesites rather than on pure play independent entities. And for what we can see, Telesites is a force to be reckoned with thanks to its outstanding deployment track record in Mexico and, more recently, Costa Rica. On the other hand, Telxius, whose IPO has been cancelled back in September, is yet to unfold its future plans which could possibly include the divestment of selected categories of assets.

One considerable wild card is represented by Millicom who is reportedly considering divesting the remainder of its passive infrastructure portfolios (approximately 5,500/6,000 across multiple markets). With operations across Colombia, Guatemala, Honduras, El Salvador, Paraguay and Bolivia, the potential divestment of its assets could represent an additional opportunity in already active markets as well as an entry card for entrepreneurial towercos looking at new ventures in places like Paraguay and Bolivia (the latter offering scale opportunities with Trilogy’s Viva portfolio being up for sale too)

Meetup Americas 2017

Wednesday 7 and Thursday 8 June, Boca Raton Resort and Club, Boca Raton

A unique networking opportunity with 250 leaders of the CALA telecom tower industry

To discuss your participation, contact Annabelle on +44 7423 512588 or email [email protected]

Silver Sponsors:Diamond sponsor:

Bronze Sponsors: Organised by:


TowerXchange’s who’s who in CALA towersTowerXchange presents an A to Z of MNOs, towercos, investors and advisors who are key stakeholders in the CALA telecom tower industry

Accel: One of the leading venture capital firms in the world with over US$8.8bn in capital under management, Accel has funded the likes of Facebook, Dropbox and Spotify. QMC Telecom is among its investments in the tower sector. Albright Capital Management (ACM): A private equity firm specialised in emerging markets. In April 2016, ACM granted a US$45mn five-year term credit facility to Innovattel LLC for the development of build-to-suit projects in Argentina.

AlfaSite: AlfaSite is a Brazilian build to suit (BTS) firm part of Grupo Alfa which also owns a tower manufacturer (Metal Alfa), an MSP (Alfa Erb) and an energy equipment company (Alfa Energia). Algar Telecom: Algar Telecom is a Brazilian mobile operator serving approximately 1.5mn subscribers across Rio de Janeiro, São Paulo, Santa Catarina and Paraná among others via 31,000km of fibre. It currently offers 3G services and is working alongside Nokia Networks to launch 4G LTE. Altice: Altice took over Orange Dominicana and Tricom in 2014, respectively the second and fourth MNOs in the Dominican Republic. Orange Dominicana and Tricom both offer 3G and 4G LTE across the Dominican Republic.

Altman Vilandrie & Co: AV&Co. has extensive tower industry experience spanning tens of engagements (including Latin America, Africa, Asia, North America, Europe) over ten years, including tower operator strategies as well as tower transaction due diligences. Their recent work has addressed a

Read this article to learn:< Towercos who’s who: a comprehensive guide to 34 towercos active in the CALA region< Thirty of the most respected CALA-focused investors, advisors and law firms < MNOs guide: MNOs footprint and tower strategy at a glance

Home to dozens of towercos from listed giants American Tower, SBA Communications and Telesites to PE-backed independent firms such as Grupo TorreSur, Torrecom and Phoenix Tower International, the Central and South American tower market has been constantly expanding since 2001, when American Tower closed its first tower deal in Brazil with GVT. In this special feature, TowerXchange offers a comprehensive index of top towercos, MNOs, investors and advisors active in the CALA telecom tower industry.

Keywords: 3G, 4G, AT&T, Accel, Active Infrasharing, Albright Capital Management, AlfaSite, Algar Telecom, Altice, Altman Vilandrie & Co, American Tower, Americas, América Móvil, Analysys Mason, Andean Tower Partners, Argentina, Avantel, Balesia, Berkshire Partners, Bitel, Blackstone’s Tactical Opportunities, Bolivia, Brazil, Brazil Tower Company, Build-to-Suit, Cable & Wireless, Caribbean, Carve Out, Catalina Inc., Cell Site Solutions, Centennial Towers, Central America, Chile, Citi, Co-Locations, Colombia, Continental Towers, Costa Rica, DAS, Debt Finance, Delmec, Deutsche Bank, Digicel, Digital Bridge, EY, El Salvador, Entel, Entel SA, First Corporate Finance Advisors, GP Investments, Golden Comunicaciones, Goldman Sachs, Grupo TorreSur, Guatemala, Gávea Investimentos, Hardiman Telecommunications, Highline do Brasil, Honduras, Housatonic Partners, ICE, IFC, IIMT, ING, Indigo Capital, Infrastructure Sharing, Innovattel, Instituto Costarricense de Electricidad, Intelli Site Solutions, International Finance Corporation, Investment, Iusacell, JP Morgan, Jamaica, KPR Consult, LTE, MCM, MHC Holdings, MVP Capital, MX Towers, Macquarie, Madison Dearborn Partners, Message Center Management, Mexico, Mexico Tower Partners, Millicom, Montezuma & Porto, NII Holdings, NMS, Nextel, Nicaragua, Norton Rose Fullbright, Oi, Orange, P2, PTI, Panama, Peppertree Capital, Peru, Peterson Partners, Phillips Lytle, Phoenix Tower International, Phoenix Tower do Brasil, Private Equity, Providence Equity Partners, Pátria, QMC Telecom, RBC Capital Markets, Rent-A-Tower, SBA Communications, Sale & Leaseback, Scotiabank, Sercomtel, Silver Swan Capital, Skysites, Small Cells, South America, Southern Cross Group, Summit Wireless Infrastructure, TIM Brasil, TOCSA Towers, Telecom Personal, Telecommunications Partners, Telefónica, Telesites, Telxius, Torrecom, Torres Andinas, Torres Unidas, Trilogy International Partners, UBS, V&E, Vinson & Elkins, Viva Bolivia, Viva Dominicana, WOM, Who’s Who


number of relevant topics such as the impact of small cells, the future opportunity for DAS and the changing role of rooftops.

América Móvil (AMX): AMX is one of the largest mobile network operators in the world and part of the Carlos Slim’s group of companies, serving approximately 284mn mobile subscribers across fourteen markets.

Back in 2014, AMX faced regulatory pressure to reduce its dominant position in Mexico, which forced it to carve-out over 11,000 of its telecom towers and create Telesites, a separate infrastructure entity (see Telesites for more details). Apart from the Telesites venture, which has already expended into Costa Rica, AMX has not faced regulatory or balance sheet pressure to divest assets elsewhere, and thus has favoured retaining their towers. América Móvil operates as Claro in most of its CALA markets and it offers both 3G and 4G LTE in all of them except Honduras, Nicaragua, Guatemala and El Salvador (3G). In Mexico, where it operates under the Telcel brand, the operator is now offering 3G and 4G LTE.

American Tower (AMT): The world’s largest independent commercial towerco, AMT need no introduction within this publication. With its headquarters in the U.S., AMT operates a global portfolio of over 147,000 sites composed of towers in advanced, evolving and developing wireless markets, in the U.S., South America, Africa, Europe, and Asia. AMT is the leading towerco in the CALA region in terms of its tower count, with over 33,000 sites across six markets.

América Móvil’s (Telcel + Claro) footprint



Since 2011, AMT has been involved in seventeen transactions across the region and has purchased over 26,000 towers for a total value of approximately US$5.3bn. Analysys Mason: Marco Cordoni and his team at Analysys Mason are among the ‘go-to-guys’ for tower market analysis and due diligence on a global basis. Andean Tower Partners (ATP): Part of Digital Bridge Holdings, ATP is a towerco active in the Andean region. According to its CEO, Estrella Zaharia, after starting in Colombia and Peru, ATP is now looking at expanding in Chile and Ecuador. AT&T: AT&T made its entrance in the Mexican mobile market thanks to the acquisition of Iusacell, Unefon (part of Iusacell) and Nextel back in 2014. AT&T has 9.2mn subscribers as of Q2 2016 and has covered over 51mn Mexicans with 4G LTE since its entrance in the country.

AT&T has inherited networks largely divested to towercos, but has still found sufficient capacity on those inherited sites, such that the anticipated volume of new build from AT&T’s market entrance has been slow to materialise.

Avantel: Avantel is the fourth mobile network operator in Colombia where it offers 3G and 4G LTE services.

Balesia: Balesia is a BTS focused towerco operating in CALA and owned by International Tower Corporation (ITC).

Barclays: Barclays’ global investment banking division offers a leading Technology, Media and Telecoms (TMT) franchise. The TMT team has significant experience representing leading tower operators as well as telecom service providers around the globe on buy and sell side assignments. In this capacity, Barclays has supported its clients in the valuation and/or marketing of tower portfolios as well as the negotiation of various agreements associated with these transactions. Berkshire Partners: Berkshire Partners is a leading private investment firm acting through eight private equity funds with US$11bn of committed capital. Berkshire Partners has substantial experience of tower industry investments, having been an early stage investor in Crown Castle, and the company currently owns Andean focused towerco Torres Unidas. Bitel: Bitel is the fourth mobile network operator in Peru, wholly owned by Vietnam’s largest MNO Viettel and mostly focused on serving rural communities across the Andean country. Bitel offers 3G services across Peru and is now deploying 4G LTE.

Blackstone: Blackstone’s Tactical Opportunities (Tac Opps) specialises in time-sensitive and complex ventures and is the investment firm behind Phoenix Tower International’s expansion in the U.S. and CALA. Blackstone has previous experience of the towerco asset class having invested in Global Tower Partners, which they successfully exited through the sale to AMT.

Brazil Tower Company (BTC): BTC is a Brazilian BTS focused towerco with a portfolio of 750 towers. Owned by private investors, including the company’s CEO Dr Chahram Zolfaghari, and 1848 Capital, BTC has recently closed a funding deal with Silver Swan Capital for US$40mn to pursue new deployments across Brazil, targeting a tower count of 1,000. Cable & Wireless: Acquired by Liberty Global in November 2015, it serves 3.7mn subscribers in fifteen markets across the Caribbean and Latin America under the FLOW brand. Catalina Inc.: Catalina is a BTS firm active in Costa Rica.

Cartesian Capital Group: a global private equity firm with proven expertise in assisting closely-held companies to expand internationally. The firm is a large shareholder in NMS and BTS Towers de Peru and has a smaller participation into Grupo TorreSur. Cartesian manages more than $2.4 billion in capital and has offices in New York, Sao Paulo, Shanghai, Warsaw and Bermuda.

Centennial Towers: Centennial Towers is a BTS firm active in Colombia, Brazil and Mexico funded by Breslau Capital, a New York based firm with presence in both Panama and Tel Aviv. In addition to its core markets, Centennial has a presence in various CALA countries thanks to its network of partners and a portfolio of several hundred sites across Chile, Costa Rica, El Salvador, Panama, Peru, Argentina and the Dominican Republic. Continental Towers: Continental Towers is a BTS


firm focused on deploying sites in Central America. Originally a joint venture between Terra Projects and Credit Suisse, it then received a US$120mn loan package from the IFC to further fund its Central American expansion in 2012. Since then, the company has been quite secretive and to date, it operates in Guatemala, Costa Rica, El Salvador, Jamaica, Honduras and Panama with an estimated total tower count of around 700 sites.

Cell Site Solutions (CSS): CSS was created in 2013 as a joint venture between Gávea Investmentos and Goldman Sachs. Focused on BTS projects, co-locations, DAS and full turnkey services in Brazil, it runs a portfolio of over 1,200 sites across the country.

Citi: One of the world’s leading tower transaction advisory groups can be found within the TMT team at Citi.

Delmec: The tower experts in consultation and engineering, providing global solutions to operators, towercos and regulators on standards, guidance and due diligence for portfolio management. Engaging audit, assessment and analysis for structural enhancement, capacity and maintenance as individual activities or by way of managed services.

Deutsche Bank: Deutsche Bank provides M&A advisory services as well as financing services in the tower space, including both equity and debt products. Deutsche Bank has been involved in the tower sector on a global basis, successfully executing transactions in North America, South America, Europe, Africa and Asia.

Digicel: Digicel is a leading MNO with a presence in over twenty country across Central America and the Caribbean, including Jamaica, Panama, El Salvador and Haiti. Owned by Irish telecom tycoon Denis O’Brien, Digicel has only dabbled in towerco relationships to date; selling a handful of towers in Central America and creating then successfully exiting a towerco in Myanmar.

Digital Bridge: Digital Bridge, the holding company behind Andean Tower Partners and Mexico Tower Partners, was created in 2013 by Ben Jenkins (Dering Capital) and Marc Ganzi (former CEO of GTP) after the sale of GTP to American Tower for US$4.8bn. The holding manages around US$3bn in assets across multiple international locations.

Digital Bridge are renowned for having a more expansive investment thesis than the U.S. publics; they will often be pioneers in new markets and new asset categories (such as small cells and data centres), and have an appetite to rollup smaller portfolios.

Entel: Created back in the sixties by the Chilean government, Entel was privatised in the early nineties. Since then, the company has become the largest mobile network operator in Chile and in 2013 acquired Nextel de Perú for US$400mn. To date, Entel owns approximately 3,000 sites in Chile and 2,400 in Peru and offers 3G and 4G LTE services in both countries. While the company has not to date sold any towers, Entel have increasingly relied on third party towercos for new sites.

Entel SA: Entel SA is the Bolivian State-owned telecom company which was nationalised in 2008. Former shareholders include Telecom Italia which settled a dispute with the Bolivian government over the nationalisation for US$100mn. The operator now offers 3G and 4G LTE services in the country.

EY: TMT strategy and corporate finance advisory team with extensive experience of advising on tower transactions.

First Corporate Finance Advisors: First is a financial advisory firm based in Argentina. The company specialises in M&A, valuation, infrastructure advisory and securitisation. Serving clients throughout Latin America, First is now actively involved in the opening of the Argentinian telecom tower market. Gávea Investimentos: Gávea was founded back in 2003 by the former president of the Central Bank of Brazil, Arminio Fraga. The fund invested approximately US$150mn to create CSS back in 2013 in a joint US$300mn investment with Goldman Sachs. Golden Comunicaciones: Created in April 2016 via a joint venture between Goldman Sachs and Innova Capital Partners, the BTS firm is now focused on serving the Colombian telecom market and headed by CEO Herman Torres.

Goldman Sachs: Goldman Sachs returned to the Brazilian private-equity market with its 2013 investment in CSS, alongside Gávea Investimentos. In April 2016, Goldman Sachs created a joint venture


with Innova Capital Partners for the creation of Golden Comunicaciones, a BTS firm focused on the Colombian market.

GP Investments: GP Investments is a leading investment firm in Latin America and was the firm behind BR Towers, one of the leading towercos in Brazil with its 4,200 sites that was sold to American Tower in 2014 for US$978mn. Grupo TorreSur: With its 6,500 tower portfolio, GTS is the third largest towerco in Brazil and the largest private towerco in CALA. Headed by Jim Eisenstein, one of the pioneers of the U.S. tower industry and co-founder of AMT, GTS is funded by Providence Equity Partners, one of the leading equity firms in the global TMT industry.

Hardiman Telecommunications: A unique consultancy equally capable of advising on engineering and operational issues as they are on commercial strategy and corporate finance. Extensive experience advising on both the buy-side and sell-side in tower transactions. Highline do Brasil: Headed by Alexandre Braga, former executive within AMT in Latin America, Highline was created back in November 2012 to serve the Brazilian market with its BTS and co-location services. Since then, Highline added approximately 500 sites to its portfolio via both organic growth and acquisitions. In 2015 the company sealed two buy and leaseback deals for a total of 196 sites. Additionally, the towerco is now focused on offering street furniture solutions to mobile network operators in Brazil.

Housatonic Partners: Housatonic Partners is a U.S. private equity firm with over US$1bn in capital under management. QMC Telecom is among its investments in the telecom infrastructure sector. Instituto Costarricense de Electricidad (ICE): ICE is the State-owned electricity and telecom provider of Costa Rica. Operating under brand Kölbi, the company is the leading MNO in the country ahead of Movistar and Claro. ICE has to date retained its portfolio of ~1,000 towers, but has used towercos for new build and co-location.

International Finance Corporation (IFC): A member of the World Bank Group, the IFC is the largest financing institution in the world entirely focused on the private sector, with specific attention to developing and underdeveloped countries. In CALA, the IFC is involved in various debt financing projects with the likes of Phoenix do Brasil, ON Telecom, Continental Towers and more.

IIMT: IIMT is a BTS and co-location firm active in Mexico where it runs approximately 450 sites. In addition to its own portfolio, IIMT enjoys an agreement with the Federal Electricity Commission in Mexico to utilise its infrastructure for telecom purposes.

Indigo Capital: Indigo Capital was founded in 1998 in New York and is an investment firm focused on private equity in Latin America. Indigo Capital counts Torrecom and Torres Unidas among its investments.

ING: Leading Dutch bank with considerable experience of providing debt finance to the tower industry.

Innova Capital Partners: Innova is a global investor focused on energy and infrastructure projects and the investing arm behind Golden Comunicaciones (Colombia), via a joint venture with Goldman Sachs. Innovattel: Operating under the brand Torresec in most markets and headed by Manuel Aviles, Innovattel is a Puerto Rico based BTS firm active in Colombia, Peru, Panama, Ecuador, Puerto Rico and Argentina with a total portfolio of over 800 sites. Torresec sold 130 Ecuadorian towers to SBA in 2015. The first towerco to enter Argentina, Innovattel sealed a US$45mn five-year term credit facility with Albright Capital Management in April 2016 to finance its deployments in the country. Intelli Site Solutions: Intelli Site Solutions is a Mexican towerco focused on BTS projects as well as indoor and outdoor DAS. The towerco runs a portfolio of 202 towers across Mexico.

Iusacell: Iusacell was a mobile operator active in Mexico that got acquired by AT&T in January 2015 for US$2.5bn.

JP Morgan: Leading TMT advisory team with extensive experience in towers, including some of the landmark transactions.

KPR Consult: Renowned ‘tower doctors’ – go-to guys for structural and technical due diligence, improvement capex planning, decommissioning



AMT, Centennial, IIMT, Intelli Site, MTP, MX Towers, Uniti Towers, QMC, Rent-A-Tower, Telesites, Torrecom

Balesia, Continental, SBA, Torrecom

AMT, ATP, Andinas, Balesia, Innovattel, NMS, Unidas

AMT, Balesia, Unidas

Aplicanet, Balesia, Innovattel, SBA

Balesia, Continental

Balesia, Continental, SBA

Balesia, SBA, Torrecom

AMT, Balesia, Catalina, PTI, SBA, TOCSA

Continental, Innovattel, SBA

AMT, ATP, Andinas, Centennial, Golden Comunicaciones, Innovattel, Uniti Towers, PTI, QMC, Unidas

AMT, AlfaSite, BTC, CSS, Centennial, GTS, Highline, PTI, QMC, SBA, Skysites

American Tower, Innovattel, Plata Tower Company, Teletower Argentina, Tower 3

Continental

PTI


Towercos have acquired the majority of towers from carriers

Towercos have acquired a significant proportion of towers

from carriers, but the majority remain carrier-owned.

Significant BTS towerco activity also present

Less SLB activity, but plenty of BTS towerco activity

Early stage market for BTS and/or SLB

Negligible towerco activity

Legend

and just about anything to do with tower design and maintenance.

Macquarie Group: Australian Macquarie is a leading investment and advisory firm globally active in the telecom tower sector. Among its notable operations: investment in Mexico Tower Partners (via the Macquarie Mexican Infrastructure Fund and in conjunction with Digital Bridge), acquisition of InSite Wireless (Puerto Rico, U.S. and Canada) and participation in a consortium which acquired Crown Castle Australia (now Axicom). Madison Dearborn Partners: MDP is the U.S. based private equity firm behind BTS firm Centennial Towers.

Message Center Management (MCM, Inc.): MCM is a U.S. independent developer and owner of telecom towers with a portfolio of around 800 sites. Its management team is among the leading forces behind two CALA towercos, Torrecom and Torres Unidas. Mexico Tower Partners (MTP): MTP is a fast-growing independent towerco active in Mexico. MTP is a joint venture between Digital Bridge and Macquarie Mexican Infrastructure Fund. The company owns over 1,500 sites across Mexico and is run by an experienced team led by José Sola, whose background includes successful spells within Global Tower Partners and Telefónica. MHC Holdings: MHC is an investment firm focused on telecoms and emerging markets based in Panama and provides the financial backing behind BTS firm Torres Andinas.

Millicom’s (Tigo + Millicom) footprint



Millicom: Millicom is an international telecom company active in fourteen markets in Africa and Latin America, mostly trading under the brand Tigo. In the CALA region, Millicom is active in Guatemala, El Salvador, Honduras, Paraguay, Nicaragua, Colombia and Bolivia. Tigo sold 2,126 towers to American Tower in Colombia back in 2011 but has retained its tower portfolios in the other markets where it operates.

To date, Tigo offers 3G and 4G LTE services in Paraguay, Colombia and Bolivia and 3G in El Salvador, Guatemala and Honduras.

Montezuma & Porto: Montezuma & Porto is a Peruvian based law firm specialised in telecommunications, IT, Internet, data protection and other digital services. Partners Oscar Montezuma Panez and José Miguel Porto Urrutia have advised towercos and mobile operators on a variety of strategic issues.

MVP Capital: Financial brokers and advisors active in the U.S. since 1987. Clayton Funk, one of its Managing Directors, has been personally involved in 125 sale and leaseback transactions and although focused on the U.S., he always keeps an eye South of the border. MX Towers: MX Towers is a new firm created by executives previously involved in the Macquarie Mexican Infrastructure Fund focused on offering DAS and other alternative solutions to its Mexican clients. NII Holdings: NII Holdings is the company behind

the Nextel brand. To date, NII Holdings owns only Nextel Telecomunicações, the fifth mobile network operator in Brazil currently offering 3G and 4G LTE. In May 2016, Nextel sealed a RANsharing agreement with Telefónica’s Vivo.

Between 2013 and 2015, NII Holdings run the Nextel brand in Chile, Peru and Mexico but then sold them respectively to Novator, Entel Chile and AT&T. Additionally, in 2013 NII Holdings divested 6,396 towers in Brazil and Mexico (to American Tower) and faced bankruptcy in 2015.

In 2016, NII Holdings sold all its remaining shares in Nextel Argentina to media giant Clarín Group. Nextel Argentina is now owned by Clarín’s subsidiary Cablevisión and is the fourth mobile operator of Argentina. NMS: NMS is a BTS firm active in Mexico, Colombia, Peru and Nicaragua where it runs a total portfolio of 600 towers. Norton Rose Fulbright: Norton Rose Fulbright is a Legal 500 law firm serving clients in a multitude of industries. Among them, the law firm provides services in the infrastructure and TMT arenas and is able to help its CALA clients via its offices in Brazil, Colombia and Venezuela. Oi: Oi is the fourth mobile network operator of Brazil offering 3G and 4G LTE services. Since 2012, Oi has divested the majority of its 11,000+ towers across Brazil to Grupo TorreSur, BR Towers and SBA Communications.

On June 20, 2016 Oi filed for bankruptcy protection for a total amount of US$19bn (the largest filing in the history of Brazil) and recently presented a recovery plan for creditors. The recovery plan may eventually ease Oi’s burdensome payroll and fixed network connectivity obligations and enable the company to recommence network investment in the medium term. Orange: Orange is the leading French telecom operator founded in 1988 with operations in Europe, Africa, Asia and the Americas. In the Americas it is active in Guadeloupe, Martinique and French Guiana where it offers 3G services. Its Dominican Republic unit was sold to Altice in 2013. P2 - Pátria: Pátria is a leading private equity firm active in Brazil in a variety of sectors including infrastructure and counting Blackstone among its partners. In 2012, Pátria invested in Highline do Brasil and in 2015 in Odata, a data centre infrastructure and co-location service company.

Peppertree Capital: Peppertree is a private equity fund focused on growth equity, recapitalisation and buyout opportunities in the telecom infrastructure industry. Mostly focused in the U.S. where it has backed companies such as Branch Towers, 4G Towers, Clearview Tower Company and Light Tower Holdings, it keeps an eye on opportunities in Central and South America.

Personal: Owned by Telecom Argentina, Telecom Personal is third mobile network operator in the country where it offers 3G and 4G LTE services.


Peterson Partners: Peterson Partners is a private equity and venture capital firm primarily active in the U.S., Canada, Europe, Mexico, Brazil and India and counts QMC Telecom among its PE investments.

Phillips Lytle LLP: Phillips Lytle is a U.S. based law firm offering a wide range of services. Partner Douglas Dimitroff is an expert in DAS and other het-net solutions and is able to advise U.S. as well as international clients on their business and regulatory dynamics. Phoenix Tower do Brasil: Phoenix Tower do Brasil is the Brazilian subsidiary of Phoenix Tower International. Run by former BR Towers’ CEO Mauricio Giusti, the towerco now owns and operates 700 sites across Brazil.

Phoenix Tower International (PTI): PTI was founded in 2013 by Dagan Kasavana, the M&A

mastermind behind the GTP rollup strategy and sale to American Tower, along with other GTP alumni such as Tim Culver and Natalya Kashirina. PTI now owns and operates 880 towers across the CALA region, 635 in the U.S. and controls its 700-tower Brazilian subsidiary, Phoenix Tower do Brasil. PTI has achieved its current scale via both organic and inorganic growth transactions and is active in Colombia, Costa Rica, Panama, the Dominican Republic and the U.S.

Providence Equity Partners: One of the largest global private equity firms operating in the TMT industry, Providence manages over US$23bn in equity commitments and is an investment partner of Brazilian towerco Grupo TorreSur. QMC Telecom: QMC Telecom was founded back in 2008 and currently runs a portfolio of 900+ towers as

well as rooftops and DAS in Brazil, Colombia, Puerto Rico as well as Mexico, where it operates under the Conex brand.

RBC Capital Markets: RBC Capital Markets is a Canadian investment bank part of the Royal Bank of Canada. Jonathan Atkin and Jonathan Dann, Managing Directors of RBC’s Telecom Research, are two of the most respected analysts in the global telecom and tower space and regulars at TowerXchange Meetups. Rent-A-Tower: Rent-A-Tower is a BTS firm active in the Mexican market. SBA Communications: With over 26,000 towers across the U.S., Central and South America and Canada, SBA is one of the top ten towercos in the world. SBA runs over 7,000 towers in Brazil and 2,500 sites across Costa Rica, Panama, Nicaragua, Guatemala, El Salvador and Ecuador. Since 2012, SBA has been involved in five tower transactions across the region and has purchased over 6,690 towers for a total value of approximately US$1.7bn. Scotiabank: In November 2015, Scotiabank granted to Phoenix Tower Dominicana (Phoenix Tower International subsidiary) a US$45mn five-year credit facility to finance the acquisition of Teletower Dominicana and further develop its portfolio in the country. Sercomtel: Sercomtel is a local mobile network operator serving the Brazilian region of Paraná. Silver Swan Capital: Silver Swan Capital, a NY-based



investment firm, sealed a US$40mn funding deal with Brazil Tower Company in August 2016 to finance the towerco expansion plans across Brazil.

Skysites: Skysites is an infrastructure firm active in Brazil focused on BTS, small cells, co-locations and iDAS. The company is led by Roberto Massaru Nishikawa. Southern Cross Group: Southern Cross Group is a private equity firm focused on Latin America with offices in Argentina, Brazil, Chile, Colombia, Mexico, Uruguay and the U.S. Mexican BTS and MSP firm Even Telecom is among its latest investments in the telecom infrastructure industry.

Summit Wireless Infrastructure: Summit Wireless Infrastructure is a BTS firm active in Brazil, Mexico, Colombia and Peru headed by Lawrence Gleason, former COO of AMT’s Latin American business. Summit is a subsidiary of Communications Sales & Leasing, Inc., a U.S. publicly traded Real Estate Investment Trust (REIT).

Telecommunications Partners: Telecommunications Partners is a BTS firm active in the Peruvian market.

Telefónica: Telefónica is a Spanish telecom company active in Europe, Asia, North, Central and South America. In the CALA region, it operates under the Vivo and Movistar brands in Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Panama, Peru, Puerto Rico and Venezuela.

Since 2011, Telefónica has entered into fourteen tower transactions, divesting over 11,000 towers across the region. The last three transactions were sealed with

Millicom’s (Tigo + Millicom) footprint

Telefónica’s (Vivo + Movistar) footprint



Telxius, the company’s own carve-out infrastructure company created at the beginning of 2016, and due to IPO in Q4 2016.

In Brazil, Telefónica operates under the Vivo brand and has recently sealed a spectrum sharing agreement with Nextel. Vivo and Claro signed a network sharing agreement in 2013 and are currently working to take the total number of shared sites to 412.

Telefónica offers 3G and 4G LTE services in most CALA markets beside El Salvador, Nicaragua and Venezuela (3G only).

For the infrastructure firm created by Telefónica in 2016, see Telxius. Telesites: Telesites is the infrastructure company created by Carlos Slim which debuted on the Mexican stock exchange in December 2015. As of Q2 2016 the company owns and manages 13,873 towers in Mexico as a result of the transfer of assets from América Móvil as well as organic growth. Additionally, Telesites is active in Costa Rica where it is building close to 300 sites for Claro.

Since its creation, Telesites has added over 3,000 towers to its portfolio, proving strong growth ambitions and capabilities. The firm has opened its sites for co-location and recently sealed a lease agreement with AT&T.

Telxius: Telxius was created in February 2016 by Telefónica with the goal to manage the operator’s infrastructure including its towers and sub-sea cable. To date, Telxius manages 11,000 sites in Spain, 2,350


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in Germany, 1,655 in Brazil, 900 in Peru and 328 in Chile as well as 31,000km of submarine fibre optic cable, including SAM-1, a submarine cable that connects the United States with Central and South America.

Telefónica has confirmed plans for an IPO of Telxius before the end of 2016. Tillman Global Holdings (TGH): Multinational tower and infrastructure investment and operations firm led by Sanjiv Ahuja, former Chairman and co-founder of Eaton Towers and ex-CEO of Orange. TGH has a joint venture partnership with JC Decaux, giving them the opportunity locate points of service, particularly small cells, on over 1mn prime locations worldwide. TGH is pursuing a couple of key opportunities in CALA. TIM Brasil: Owned by Telecom Italia, TIM Brasil is the second mobile network operator in Brazil, serving more than 70mn subscribers across the country. In 2014, TIM entered into a sale and leaseback transaction with American Tower for the sale of close to 6,500 sites. The deal, valued approximately US$1bn, is still under process with its last tranche due to close before the end of 2016.

TIM Brasil and Oi sealed a RANsharing agreement back in 2014 and network sharing agreement in 2015.

TOCSA Towers: TOCSA Towers is a BTS firm active in Central America. To date, the company owns and operates approximately 130 sites in Costa Rica.

Torrecom: Torrecom is a leading BTS firm with a portfolio of over 600 sites across Mexico, Nicaragua and Guatemala. Its management team includes experienced executives from U.S. towerco MCM, Inc. such as Maria Scotti who acts as CEO and Eric Zachs, Co-Chairman and Co-Founder of MCM. Indigo Capital is one of the investment firms behind Torrecom.

Torres Andinas: Torres Andinas is a BTS firm active in Colombia and Peru run by Larry Smith and COO, Eric Ensor, a regular contributor at the TowerXchange Meetup Americas. Torres Unidas: Torres Unidas is a towerco focused on developing and acquiring sites in Chile, Colombia and Peru, where it owns a total portfolio of approximately 1,200 sites. Led by Daniel Senier, Torres Unidas counts Berkshire Partners among its investors and various MCM, Inc. and Indigo Capital executives among its board members. UBS: UBS has been globally involved in several tower transactions and has recently appointed André Laloni to run its Investment Banking division in Brazil and the Southern Cone. With seventeen years of experience in banking and specific expertise in the telecom sector, Laloni has been involved in the majority of Brazilian tower transactions.

WOM: WOM is the fourth mobile network operator in Chile where it’s been offering 4G LTE since the end of 2015.

Vinson & Elkins (V&E): V&E is one of the oldest and largest international law firms, with approximately 700 lawyers located in 15 offices around the world. Their global telecommunications team has extensive experience advising on international telecoms and telecoms infrastructure transactions in numerous countries. Viva Bolivia: Viva is the third mobile network operator in Bolivia and is owned by Trilogy International Partners. Viva launched its 4G LTE services in July 2015 and reportedly, its tower portfolio is now up for sale.

Viva Dominicana: Viva Dominicana is the third mobile network operator in the Dominican Republic where it offers 3G services. In March 2016, the MNO sealed a deal with Phoenix Tower International over the sale of 145 sites and transfer of marketing rights of a further 400 towers.

In November 2015, Trilogy International Partners sold Viva Dominicana to Telemicro Group, owned by local entrepreneur Juan Ramon Gomez Diaz

Have we missed a company active in the CALA telecom tower market? Then please email Arianna Neri, MD - Americas and Asia, at [email protected] and don’t forget to sign up for the fourth TowerXchange Meetup Americas, taking place in Boca Raton, 7-8 June 2017. More details can be found on our website: www.towerxchange.com/meetup/meetup-americas/

Who have we missed?


Special feature:

The TowerXchange Meetup Americas included country and region-

focused panels as well as 40+ interactive roundtable discussions. The

2016 panels offered insights into the dynamics, opportunities and

challenges of doing business in Mexico, the Andean region, Brazil

and Argentina. In the following pages, we offer our readers insights

into top findings, discussion points and conclusions drawn during

the various sessions held at the event.

40 Highlights from the TowerXchange Meetup Americas 2016

47 Panel report: A tough year for the Mexican tower industry

51 Panel report: The Andean market: an assessment of risks vs

opportunities

56 Panel report: Brazil: there is light at the end of the tunnel

60 Panel report: How investible is Argentina? Lessons learned at the

3rd TowerXchange Meetup Americas

64 Roundtable report: 10 ways to create (and avoid destroying) value

in independent towers

72 Roundtable report: Ground lease management: maximising the

value of the land under CALA cell towers

Roundtable and panel discussion reports


The changing shape of thetelecom tower industry in Latin AmericaHighlights from TowerXchange’s opening “State of the market” address at the TowerXchange Meetup Americas 2016

The third annual TowerXchange Meetup Americas gathered 212 leaders from the CALA tower industry in Boca Raton for two days of knowledge sharing and intensive networking. Endorsed by Diamond Sponsor SBA Communications and Bronze Sponsors Phoenix Tower International and Torrecom, the TowerXchange Meetup Americas has now established itself as the must-attend event for the industry.

Top solutions providers including Acsys, Accruent’s Siterra, Invendis, Ausonia, Ascot and Nexsysone as well as leading law firm Vinson & Elkins also joined the TowerXchange Meetup Americas 2016 as sponsors and contributed to the great success of the third edition of the event.

The audience included over 60 C-level and 90 representatives of regional towercos including American Tower, SBA Communications, Telxius, Mexico Tower Partners, Phoenix Tower International, QMC Telecom, Torrecom, AlfaSite, NMS and Intelli Site Solutions.

Towercos currently own 48% of CALA’s 170,000 towers. The landscape of towercos features three large, listed companies: American Tower, SBA Communications and Telesites; significant scale private players such as Telxius, Grupo TorreSur, Digital Bridge (MTP+ATP) and Phoenix Tower International, supplemented by a fragmented ecosystem of dozens of smaller, independent developers, mostly focused on build to suit, exemplified by Torrecom, Torres Unidas and Brazil Tower Company.

Read this article to learn:< Key characteristics of the CALA telecom tower market

< Leverage multiples achieved in past deals

< The current state of play: macro-challenges and internal factors disrupting the market

< Snapshots of Mexico, Colombia, Peru, Brazil and Argentina

Since the inception of the independent towerco model in Latin America around the turn of the millennium, operators have adopted different strategies with regards to their passive infrastructure portfolios. Some have sold towers to towercos, some have outsourced build to towercos, some have kept it all in-house. Meanwhile towercos have been able to penetrate certain markets better than others as a result of the level of engagement of the local carriers and the fundamental investibility of telecom real estate in markets such as Mexico, Colombia, Peru and Brazil. In this editorial, TowerXchange offers an analysis of the current status of these markets as well as an outlook for the future based on key findings from the third annual TowerXchange Meetup Americas, held in Boca Raton, 16-17 June 2016.

Keywords: AT&T, American Tower, Americas, Andean Tower Partners, Argentina, Brazil, Brazil Tower Company, Build-to-Suit, Colombia, Digital Bridge, Editorial, Grupo TorreSur, IIMT, MLA, Mexico, Mexico Tower Partners, NMS, Network Rollout, Nextel, North America, Oi, Peru, Phoenix Tower International, SBA Communications, Sale & Leaseback, South America, Tax, Telefónica, Telesites, Telxius, Torrecom, Torres Andinas, Torres Unidas

Kieron Osmotherly, Founder and CEO of TowerXchange with Jeff Stoops, President and CEO of SBA

Communications and Bill Bates, former VP Business Development, SBA Communications, now Senior Vice

President within Brookfield Infrastructure Group


2011-2013 were characterised by substantial Sale and Leaseback (SLB) activity with Telefónica, Oi and Nextel and others divesting thousand of towers across the region. And even though this phase of SLB has slowed down, the industry is now waiting for the next wave of transactions, which will be mostly focused on consolidation among towercos.

In terms of deal value, the regional industry has so far enjoyed healthy tower cash flow (TCF) multiples ranging between 12x and 17x. But whether towercos can still realise the same returns upon exiting, will depend on a variety of factors including the quality of their assets, their location, tenants and growth potential, the characteristics of the underlying MLAs as well as the presence of a complete set of permits. In a nutshell, valuations will be defined by the degree of compliance with the industry’s best practices.

Generally speaking, the CALA telecom tower industry is being challenged by a variety of internal factors including tough competition, carriers driving prices down for build to suit (BTS) projects and lease rates.

In addition to internal factors, we’ve identified a number of macro issues that are adding pressure to an already challenged industry. The devaluation of many regional currencies is threatening the returns of towercos in countries such as Mexico, Brazil and Colombia and doesn’t favour the repatriation of funds, reducing the appeal of the region to international investors.

Towercos

Investors

Energy providers

RMS suppliers

Advisors and law firms

MNOs

Access control

Others


Audience profile, TowerXchange Meetup Americas 2016

44 %

12%

11%

9%

8%

8% 3%

5%



This situation could have a positive side-effect, pushing towercos to reinvest revenues in their respective local markets. However to date carriers are being cautious with their capital investments as a result of the same wave of macro-economic uncertainty as well as expectations of costly future spectrum auctions, such as in Colombia. The market is particularly turbulent in Brazil where the political and forex crisis has been exacerbated by the bankruptcy of Oi.

Many stakeholders in CALA towers are now playing a waiting game for what TowerXchange believes will be the next wave of deals and growth. But to achieve that, the industry needs to undergo a rationalisation that could push certain players out of the game and favour those that are sticking with the aforementioned industry’s best practices.

Mexico

Mexico is host to a wide array of towercos including listed Telesites and American Tower as well as independent developers such as Mexico Tower Partners, Torrecom, NMS and IIMT. There are 20+ towercos currently operating in the country, mostly focused on build to suit (BTS). Many of the newcomers were attracted by the entrance of AT&T and its bold investment plans .

AT&T has set a goal to become the number one operator within the next ten years which would mean surpassing Telefónica and clawing back the dominant market leadership position of América Móvil . To date, AT&T holds 8.1% market share


Breakdown of ownership of CALA’s 160,000+ telecom towers, Q2 2016

What values and multiples are we talking about?

American TowerTelesitesSBA CommunicationsGrupo TorreSurTelxiusOther independent towercosOperator-captive

14043

33809

9628

6500

12324

82000

2883


behind Telefónica at 23.2% and América Móvil at a staggering 68%. AT&T aims at covering 75mn people in Mexico by the end of 2016 and as many as 100mn by the end of 2018. To do so, it has announced investments up to US$3bn which have triggered the entrance of several new BTS firms into the country while raising the expectations of those already active in Mexico.

So far, the volume of tower build business in Mexico has been underwhelming, and the tower market is

being challenged by the devaluation of the Pesos as well as a declining price of tenancy lease rates. While most Telcel new build is being funnelled through Telesites, which added over 3,000 towers in the last five quarters, the market leading MNO had historically kept most of it’s network rollout in-house, so little has changed. However, local stakeholders are questioning the value of the existing opportunities in the market against the sustainability of this tough battle for prices and business.

In light of AT&T’s repeated bullish announcements, TowerXchange remains optimistic with regards to the future of the Mexican telecom tower market, although much will depend on the criteria that AT&T will use to select its BTS partners.

In the meantime, questions remain with regards to the future of Telefónica in the country and the impact of giant Telesites and its 13,000+ portfolio on the co-location market.

Colombia and Peru Just like in Mexico, we’ve witnessed several towercos entering Colombia over the past year, but so far the market has failed to deliver the anticipated build opportunities especially since the much awaited 700MHz spectrum auction has been delayed several times and is preventing carriers to make concrete capex deployment plans. While the volume of BTS activities hasn’t met expectations, further threats to independent developers could be posed by Telxius and Telesites if they decide to enter the market. And once again, the market is being further challenged by the downward trend of tenancy rates and by other disruptive practices including a request for towercos to cover 50% of land rent.

Drawing a comparison with Colombia, Peru seems a much healthier market and one where hopefully the recently held 700MHz auction will prompt considerable investments to build capacity and extend coverage. The Peruvian tower market has been growing at a slower pace compared

CALA currencies’ devaluation

20162014

MXN MXN

12,350Average lease rate 11,500

US$ US$

915 621,66

Average lease rate 2014 vs 2016 - Mexico


to Colombia (and neighbouring Brazil) and has attracted a lower number of towercos. However, strong firms such as American Tower, Torres Unidas, Torres Andinas, NMS and Innovattel are present in the country. Additionally, Peru is one of the very few CALA markets that has witnessed an increase in tenancy rates over the past couple of years in spite of the currency devaluation. This all contributes to TowerXchange’s evaluation of the local market being quite positive!

Brazil

With its 55,000 towers, Brazil has always been the crown jewel of the CALA tower industry but is now facing one of its toughest phases ever as

a result of the combined forex crisis, political uncertainty, financial market instability as well as the bankruptcy of Oi and the reduced capex of other carriers.

While the Brazilian tower industry is now at a standstill, with very little happening both in terms of SLB (due to scarcity) and BTS (due to reduced spending), TowerXchange believes that there are plenty of opportunities ahead for towercos able to face these tough times and gear up for what’s next.

Brazil needs as many as 100,000 new towers by 2020 to satisfy the need of the forecast 300mn subscribers that will then require coverage. And it’s obvious that this level of growth can only be achieved

thanks to the combined - and well coordinated - effort of high quality towercos and creditworthy carriers!

The trend of consolidation among towercos is likely to take root in Brazil where various BTS firms have been created on the premise of a successful acquisition by a larger entity after a five to seven year lifecycle. The slowdown of activities in the telecom industry has possibly delayed exits, but TowerXchange remains convinced that this is on the cards for various local towercos in the medium term.

The crucial question relates to valuation, and to whether buyers are ready to meet the expectations of the sellers. When it comes to valuation, macro factors such as the forex crisis are just part of a more complex model. In fact, as previously mentioned, the key element that will determine the sellability of a towerco is its compliance to the rules of the game. And in a local market currently affected by a slower pace of business, the temptation of coming to terms with lower quality standards or prices will have an impact on the future valuation of a business.

Argentina

While CALA’s more mature markets face challenging phase, Argentina has been witnessing many positive shifts in just over a year and is now positioned to host the next CALA towers gold rush. With virtually every towerco now looking at the political, industrial and economic changes

20162014

PEN PEN

2056.66Average lease rate 2722.33

US$ US$

719 800.66

Average lease rate 2014 vs 2016 - Peru

20162014

COP COP

2,008,750Average lease rate 2,025,700

US$ US$

1085.75 675.25

Average lease rate 2014 vs 2016 - Colombia


being implemented by the new Argentinian government, TowerXchange believes it’s only a matter of time before foreign investments and companies start flooding into the country.

BTS firms have an easier entry into the country since the need for coverage and capacity are such that carriers are starting to take advantage of third parties in their network deployment projects. On the other hand, there is still a way to go for any SLB to take place in Argentina, mostly in light of its burdensome tax regime. There is still a variety of limitations such as the absence of indexation which are particularly crucial for listed entities but Argentina presents very interesting opportunities for towercos willing to be first movers.

Conclusions

Since the entrance of independent towercos in the CALA market, almost 30,000 towers have changed hands from carriers to towercos for a combined US$3.5bn. While the excitement of those SLB days is now dying down, the industry needs to gear up for the next phase of consolidation.

As the industry matures, an enhanced level of discipline and business acumen is needed especially since carriers are becoming smarter and more careful in their capex strategy.

TowerXchange remains positive with regards to the region’s growth potential, which couldn’t be fulfilled without the contribution of independent

American Tower

SBA Communications

Grupo TorreSur

Telxius


Remaining big 4 operators

Other operators including Nextel, Sky Brasil,

Algar Telecom, Sercomtel and ON Telecom

Brazil - Estimated tower count: 54,751


Brazilian independent towercos


CSS

Phoenix Tower do Brasil

Brazil Tower Company

Centennial

Highline do Brasil

AlfaSite

Torres Online

Skysites

Telecom Torres

Allowance for other small towercos

18851

71386500

4607

15000

4607

1655

1203

700

923400

1000

150 514040

100


towercos and their investment and know-how. With 4G penetration at 11% in Brazil, 7% in Mexico, 8% in Colombia and just 4% in Peru, capacity remains a crucial issue across the region and tens

of thousands of new towers are needed to satisfy data needs. And while we witness these markets maturing, we keep an eye on new frontiers such as Argentina that could open up in the near future

140%

SIM penetration

1,500-2,000new sites neededper year 2016-2018

16,000existing towersin Argentina

US$2.2bn:Raised during the 2014

4G spectrum auction

$$$$

US$9bn:expected combinedMNOs investmentsin the next five years

$$$$

35%

Incometax rate

VAT

21%

Wealthtax

1%

1:BTS firmactive inArgentina(Innovattel)

US$7+averageARPU

32-33%:the marketshare of eachof the threetop MNOs

the newregulatorENACOMresultingfrom themerge of

AFSCA

andAFTIC

1

Argentina: fast facts

The fourth edition of the TowerXchange Meetup Americas is taking place 7-8

June 2017 in Boca Raton, Florida and further information can be found on

www.towerxchange.com/meetup/meetup-americas/

Jonathan Dann, MD at RBC Capital Markets and Edgar Geidans, Group CTO at Trilogy International Partners during the

TowerXchange Networking Dinner


A tough year for the Mexican tower industryWhile expectations were running high, a lot of BTS business remains on hold in Mexico

Moderated by Marco Cordoni, Senior Partner within Analysys Mason, the Mexico panel featured Maria Scotti, CEO of Torrecom; Felipe de Antuñano, Co-CEO within Intelli Site Solutions; Mariano Gomez, Vice President at NMS; José Sola, CEO of Mexico Tower Partners and Alex Wright, MD within analyst firm Nau Securities.

One year, so many new towercos…

The panel initially addressed the current state of the market by drawing a comparison with twelve months ago, which revealed how the number of towercos active in Mexico doubled had in a relatively short period of time. The inflow of build to suit firms in the country was mainly driven by the entrance of AT&T into Mexico and its forecast US$3bn financial commitment to extend its network and coverage (to which it then added considerable further investment to integrate 6,000km of fibre network).

However, AT&T didn’t immediately assign search rings and started revising its compliance system as well as its validation and approval standards. AT&T’s approach has contributed to yet another very slow year for the Mexican tower industry.

In fact, while 2015 has been an “on-hold” year due to the creation of Telesites and Nextel’s bankruptcy filing, the market hoped 2016 to be a year of network investments in Mexico but as of June, the volume of new business has been disappointing with AT&T not jumping on new projects but taking a slower route.

AT&T’s approach was seen by the panel as the

Read this article to learn:< The current state of play in Mexico: from AT&T to Telesites

< Can all the BTS players survive another slow year?

< What all the latest changes mean for the local tower industry

< New investments aren’t enough to improve QoS

< The 700MHz shared network: dream or reality?

In just over a year, Mexico has witnessed some crucial changes that have completely reshaped its telecom tower industry. From the creation of Telesites and its debut on the Mexican stock exchange to AT&T’s acquisition of Nextel, Iusacell and Unefon, expectations for an exciting year were flying high in 2015, but trading conditions over the past twelve months have been more challenging than many forecasted. At the third annual TowerXchange Meetup Americas, several Mexican stakeholders took centre stage and openly shared their side of the story.

Keywords: 3G, 4G, AT&T, American Tower, Americas, América Móvil, Analysys Mason, Build-to-Suit, Co-locations, Infrastructure Sharing, Intelli Site Solutions, Investment, Iusacell, LTE, Mexico, Mexico Tower Partners, NMS, Nau Securities, Network Rollout, Nextel, North America, QoS, South America, Telcel, Telefónica, Telesites, Torrecom, Unefon

The Mexico panel at the TowerXchange Meetup Americas 2016


obvious path of a world class carrier entering a new market - considerate, attentive and cautious. In fact, while América Móvil has never been a large BTS client for any Mexican towerco, and Telesites’ BTS leftovers continue to represent a bonus for other towercos, the extinct Nextel and Iusacell had always worked with third-party towercos on their deployment needs.

Additionally, American Tower is a long-term AT&T partner when it comes to BTS in the United States and the continuity of that partnership South of the border seems quite obvious and is likely to further reduce the ability of other towercos to capture considerable business from AT&T in the near future.

In the meantime, we must remember that Telefónica’s investment history in Mexico has always been far from great and the panel defined their “lack of network attention” as “almost frightening” and stressed that its “churn is becoming dramatic” as other companies build around them.

So the market is now filled with long standing and new BTS firms expecting to serve one customer - AT&T - which is still assessing its needs and redrawing its standards, “giving towercos less certainty as to what they can expect from their clients.”

While América Móvil’s Telcel is still by far the leader in terms of market share at 68%, AT&T did manage to launch its first 4G LTE service back in

October 2015 and is already serving one third of the entire Mexican population, showing that in spite of a slow approach to establishing partnerships with towercos, AT&T is committed to investing in Mexico. And this might lead to plenty of opportunities for BTS towercos in the mid-term.

Investments needed to improve QoS in Mexico

The Mexican Secretariat of Communications and Transport (SCT) recently announced that more than US$6.5bn were invested in the country over the past three years. However, these investments haven’t

necessarily translated in improved QoS across the country.

Additionally, MVNOs are starting to look at Mexico and will add pressure on the existing network which is already inadequate. In fact, the panel agreed that with approximately 4,000 subscribers per site and a slow pace of investments, the level of coverage in Mexico is “worse than Haiti.”

In order to invest in new technology and network deployment, operators need to earn money. And while ARPU (US$7.45) is higher in Mexico than

Panel moderator: Marco Cordoni, Senior Partner, Analysys Mason


in many other CALA markets, it has suffered a decline (-8.8%) over the past year as a result of the devaluation of the Mexican Pesos and a downward price trend. The decline is also partially due to operators adding new subscribers (especially Telcel and AT&T) with aggressive packages, therefore diluting their average ARPU.

While Mexican operators engage in a tariff war, rumours suggest that Telefónica might be sounding

out the possibility of an IPO and the panel was in agreement that the Spanish operator should either commit to higher investments or sellout its Mexican operations.

Is Telesites a real threat to towercos?

The panel went on to consider the impact of Telesites on the independent developers and Mexican BTS market. While there remain doubts

with regards to the intention of Telesites to aggressively market its portfolio of assets and even the suitability of those assets to being shared (for their strength, height and response time), the carve out towerco has now claimed a good proportion of Telcel’s new builds. This leaves only crumbs to other towercos.

The towerco industry beyond Mexico will be marked by a “before Telesites and Telxius” and “after”, since these carve outs have the potential to dramatically disrupt the shape of the traditional towerco model. However, the creation of Telesites also brought some positive changes in Mexico. In fact, while historically Telcel didn’t mind building its own sites next to existing sites owned by other operators, Telesites is now refraining from building parallel infrastructure.

On the other hand though, Telesites is a different breed of player. Created by the masterminds behind giant América Móvil and able to seriously threaten BTS firms and their co-location potential by leveraging its 12,000+ portfolio of assets.

In terms of targets, Telesites aims to reach around 18,000 sites and a tenancy ratio of 1.6x by 2020. And while its current pace in terms of new builds might allow the company to reach a total tower count close to target, the tenancy ratio seems quite bold and, as noted by Nau Securities, 1.4x seems a more realistic goal. Telesites is also targeting co-locations and has signed lease agreements on ~250 sites, mainly with AT&T.

Nau Securities’ Wright commented on the company’s

Felipe de Antuñano, Co-CEO, Intelli Site Solutions


share price and noted that its listing was quite peculiar since in most new listings you’d have around three years of operations and financials to base a price analysis on.

In Telesites’ case, the company had just come into existence thus investors questioned its ability and intention to operate as an independent towerco. Since its listing, Telesites’s share price has been quite volatile (MXN11.11 as of today, 11 July) but its current share price seems to be based on the future anticipation of 1.6x rather than on the company’s current state of play.

How likely is the 700MHz shared network?

Back in 2014, the Mexican government announced a project to enhance the level of competition in the telecom industry by creating a 700MHz nationwide shared broadband network, whose spectrum has been auctioned back in January 2016 (winners are expected to be announced in September).

The project should help small mobile network operators to enter the Mexican market by using the State-owned network rather than building their own and the shared network should cover 98% of the Mexican population by 2018 thanks to an investment now estimated around US$7.5bn.

Some panellists commented that while last year the project seemed completely unfeasible, some consultations over strategy have been conducted over the past twelve months and although very complex, the project is supposedly going to

happen. However, other members of the panel noted how the project has been delayed several times and questioned its capability to attract customers, especially in light of declining ARPUs and some underlying issues such as what existing infrastructure is expected to be utilised for it. Skeptical parties concluded that operators are very likely to rollout their own LTE network and no one is currently cancelling their existing plans.

The panel took this occasion to highlight that while permits for the shared network have always been available, the private sector doesn’t enjoy such an easy framework when it comes to permitting and dealing with the regulatory environment. And the hope is that some considerable improvements will be made in the near future.

Conclusions

Mexico is now undergoing an extremely delicate phase of radical changes and adjustments and TowerXchange believes that the market will take a further 18-24 months to stabilise. Upon reaching a certain balance, the Mexican telecom market will offer new opportunities to towercos but what is left to be seen is who will be around when the pace of BTS finally picks up.

In the meantime, the migration from 3G to 4G LTE will require operators to enhance the level of technology on existing sites and the tower industry is likely to get involved in more amendments than new builds in the near future.

While the upcoming months might not be the most exciting for the Mexican tower market, TowerXchange believes that once AT&T gets up to speed with regards to its internal procedures and future plans, there will be considerable BTS opportunities in Mexico. And our hope is that BTS projects will be assigned in consideration of the quality and credibility of partners so to favour the growth of the market and continuity of trustworthy BTS firms

Maria Scotti, CEO, Torrecom


The Andean market:an assessment of risks vs opportunitiesSlow build-to-suit activities, financial challenges and yet room for growth

A quick introduction to the participants in this panel. Among its operations, build-to-suit (BTS) firm Innovattel is active in Ecuador and Colombia while Torres Andinas offers BTS services in Colombia and Peru. Entel, the third operator in Peru and second in Chile by market share, currently holds 2,700 sites in Peru since its acquisition of Nextel. Peppertree has extensive investment experience in both the United States and Latin America and lastly Andean Tower Partners has recently launched operations in both Peru and Colombia with a view to expand further in the Andean region.

How are towercos doing in Colombia?

Crabtree asked the panel to share their views on Colombia, a market that have been targeted by tens of BTS firms over the past couple of years. Innovattel’s Aviles pointed out that while there are plenty of towercos waiting for assignments in the country, operators have put rollouts on hold while waiting for the repeatedly delayed spectrum auction. Eric Ensor agreed and added that Colombia has been hit by a perfect storm combining bad macro-economic conditions, a variety of tough micro-issues such as a sharp decline in lease rates and way too many players chasing too little business; he wouldn’t be surprised if some towercos end up exiting the Colombian market.

One of the risks related to operating in a crowded market unable to offer enough opportunities is that some players might end up making illogical business decisions, such as accepting unreasonable conditions from mobile network operators, just to secure some

Read this article to learn:< Time for a reality check in Colombia

< Entel’s success story from Chile to Peru

< Can - and should - towercos look beyond macro-sites?

< What drives and what inhibits growth in the Andean region

< Beyond Colombia and Peru - a look at Ecuador and Chile

The TowerXchange Meetup Americas 2016 introduced regional and country-focused panels. In this editorial, TowerXchange reports on key findings from the Andean panel. Joining Eric Crabtree, Chief Investment Officer within the IFC, who moderated the panel were Manuel Aviles, President and Founder of Innovattel; Eric Ensor, COO of Torres Andinas; Fernando García Álvarez, Construction and Network Infrastructure Manager within Entel Peru; Ryan Lepene, Senior Managing Director at private equity firm Peppertree Capital; and Estrella Zaharia, CEO of Andean Tower Partners, the latest addition to Digital Bridge Holdings.

Keywords: 3G, 4G, Americas insights, Andean Tower Partners, Build-to-Suit, C-Level Perspective, Carve Out, Chile, Colombia, DAS, Digital Bridge Holdings, Ecuador, Entel, IBS, IFC, Innovattel, International Finance Corporation, LTE, Market Overview, Network Rollout, Peppertree Capital, Peru, Regulation, Small Cells, South America, Torres Andinas, Torresec, Urban vs Rural

Panel moderator: Eric Crabtree, Chief Investment Officer, IFC


business. What might seem like a wise short-term move not only disrupts the market but is unlikely to satisfy private equity investors who are usually focused on high returns.

Zaharia added the Colombian regulator - the Comisión de Regulación de Comunicaciones (CRC) - is pushing for small cells and DAS to be deployed in the country and Andean Tower Partners is now looking into this while waiting for the tower market conditions to improve.

And while towercos might struggle to find business opportunities in Colombia, Entel keeps an eye on the country after having expanded to Peru in 2014 with the acquisition of Nextel as explained by García Álvarez.

An operator’s point of view

The other side of the coin is that where there’s abundance of towercos, operators can benefit from a large array of potential partners and can leverage their strong negotiating position. This might be one of the reasons why the Andean region is witnessing a sharp decline in lease rates across the board.

García Álvarez detailed Entel Peru’s journey from October 2014 to date. Entel entered Peru and found itself competing against Claro and Movistar who owned a combined 95% market share.

With the acquisition of Nextel, Entel Peru inherited a portfolio of 800 sites against the 3,000+ portfolios of both Claro and Movistar, which forced the

newcomer to find an effective way to deploy sites and be competitive.

By partnering with six different towercos, Entel Peru was able to deploy around 750 sites in 2014 and over 1,000 in 2015 which is an exceptional achievement by any regional standards. While explaining Entel’s success story, García Álvarez stressed that in Peru it’s hard to find towercos able to offer “creative solutions” beyond the traditional 24m or 30m towers. According to him, towercos in Peru don’t engage with small cells or DAS yet, while they also tend to shy away from difficult sites or sites in remote areas while this is specifically what operators need. He then concluded by stressing that smaller towercos seem to be more inclined to create long term partnerships and to assume part of the risks related to a project, such as the worst-case

scenario of having to move a tower after having built it.

In Peru there are as many as 60,000 villages with less than 1,000 residents and Entel Peru estimates that it will need approximately 3,000 towers to cover a good portion of them. But in order to assign any business to build to suit firms, Entel is now seeking for partners with a long term vision especially since, according to García Álvarez “Entel is quite fast when it comes to making strategic business decisions and is able to select the right partner quickly, if offered the right conditions.”

Peru and the recent 700MHz auction

Adding pressure on Peruvian operators there is the recently held 700MHz auction which awarded spectrum to Entel, Claro and Movistar. The awarded

Estrella Zaharia, CEO, Andean Tower Partners; Manuel Aviles, President and Founder, Innovattel; Eric Ensor, COO, Torres Andinas; Fernando García Álvarez, Construction and Network Infrastructure Manager, Entel Peru; Ryan Lepene, Senior Managing Director, Peppertree Capital


operators are now required to cover 195 towns with 4G LTE that are either not covered at all or underserved, requiring high investments in a relatively short period of time.

One of the problems that operators face in Peru is the absence of handsets that actually work with the 700MHz band, beside the Samsung S7, and Entel is now working with Huawei on optimising LTE Carrier Aggregation. While Lima will be covered by LTE in the upcoming months, reaching nationwide

coverage is a complicated process in light of the high number of small villages and remote areas. Entel is likely to decide in the upcoming weeks whether it will proceed with a fast, 18-month deployment or will take a slower approach and embark into a 36-month project. Towercos operating in Peru will surely gear up to secure a portion of that business!

Absent from the list of operators awarded any spectrum was Vietnamese backed Bitel who,

according to the panel, is switching from 3G to 4G (using 900MHz and 1900MHz bands) - and investing US$200mn to do so - but will keep covering mostly rural areas and small cities which represent its core business. Entel noted how Bitel runs a different type of business with a pre-paid model, targeting low ARPU (US$4) customers, using sites that are often unsuitable for swaps among operators. Bitel also owns 20,000km of fibre-optic network.

Balancing flexibility and returns

In response to the operator’s perspective, Aviles highlighted that Innovattel is very flexible and fast when it comes to making business decision too and it is open to building in tough locations and negotiating prices. In Aviles’ words, his company’s attitude implies that “your problem with a municipality is my problem, too.” Zaharia added that Andean Tower Partners (ATP) are now offering small cells and DAS in Colombia.Peppertree Capital’s Lepene stressed that while investors do focus on returns, much emphasis is on creating productive and long term relationships able to secure continuity, especially during irrational times. And if this sometimes means working on tough, even uneconomic sites in addition to profitable ones, an investor must be open to the idea.

Crabtree noted how lease rates in South East Asia tend to be low compared to international standards in light of the low cost of labour and raw materials. But the same cannot be said about CALA where prices are being driven down to what looks like an unsustainable level. Another panelist added that the

Panellists during the Andean panel


U.S. market did deal with some irrational players in the past who created false expectations in terms of their ability to deliver quality sites at low prices, only to then find themselves unable to perform. Cutting corners to accepting bad deals definitely doesn’t help towercos to build difficult sites or become strategic partners to operators in the long term.

The trend of carving out

The panel then went on to discuss Telefónica’s divestiture of assets, the creation of Telxius and its impact on the telecom tower landscape.

While Innovattel’s Aviles considered Telxius a potential buyer of existing portfolios, Torres Andinas’ Ensor stressed that towercos are specialised companies in their own rights and that the creation of a truly independent tower company isn’t as easy as a transfer of assets. García Álvarez added that Entel doesn’t have any intention to deviate from its core business especially since debt is now more readily accessible.

The creation of a tower company requires a specific vision and strategy and we are now waiting to see what Telxius’ plans are. Plans that should be clearer as the company gets closer to its IPO, which seems to now be on hold due to the impact of Brexit on the international financial market.

Growth drivers and inhibitors

Despite a challenging year, the Andean region

still presents considerable growth opportunities, especially since 4G penetration is at just 8% in Colombia and 4% in Peru. The panel agreed that mobile data demand will be the main driver of growth throughout the region and that the key challenge is to find ways to achieve higher level of 3G and 4G penetration that make financial sense for both operators and towercos.

The devaluation of most regional currencies, including the Colombian, Chilean and Peruvian pesos, is making in-country financing difficult and as we know, the Andean region isn’t the only area in CALA to deal with forex challenges. And since most regional operators - except Entel - have international roots, they can pick and choose which markets to invest in based on the current levels of devaluation, which is often resulting in the CALA region being last in the queue international investments.Zaharia commented that while 4G will bring tremendous growth to everyone, data demand will also drive demand for fibre, backhaul, small cells, data centres and cloud technologies to be deployed. And since other companies within the Digital Bridge Holdings offer value-added services to their customers, Andean Tower Partners is now making its first diversified moves in Colombia.

Towercos might be inclined to look at diversification strategies, but investors aren’t always enthusiastic about moving beyond macro towers. On this note, Peppertree’s Lepene commented on the difficulties of making the economics line up when dealing with small cells,

fibre and anything beyond towers. The U.S.-based investor added that they remain open to consider opportunities for investments in DAS and small cells but under the right financial conditions.

Since Peruvian towercos don’t seem eager to commit to new technologies just yet, Entel recently deployed its own In-Building Solutions (IBS) to cover main malls. This was one of several pieces of business that Entel wasn’t able to outsource to third parties due to lack of appetite. Torres Andinas’ Ensor responded that for a towerco to move into the network business is quite a leap from “dirt, steel and concrete to a completely different set of skills and know-how” and that “being able to build a system isn’t enough if you aren’t then able to make it work.”

The panel discussed the case of the Lima airport which doesn’t have a DAS system in place yet. In this case, while towercos did look into bidding for its deployment, they didn’t manage to agree on the terms with the airport’s landlord - LAP partners, a partnership between German airport operator Fraport AG Frankfurt Airport Services Worldwide, the IFC and the Fund for Investment in Infrastructure, Public Services and Natural Resources, managed by AC Capitales SAFI S.A.

Looking at some of the limitations that towercos encounter in the region, the panel went on to discuss the complexity of the permitting process. Towercos noted how theirs and the operators’ involvement in the regulatory process is key to ensuring that new legal frameworks are designed


to ease network and infrastructure deployment while creating a stable environment for the industry to develop.

There was consensus on the crucial role of towercos in spreading awareness among communities with regards to the nature of the business and positive impact that connectivity can have on rural villages and underserved towns. Many communities located in the most remote areas of the Andean region don’t necessarily grasp the operating principles behind mobile phones and should be educated in order to ensure their buy-in during any greenfield project.

Ecuador and Chile

Ecuador and Chile weren’t discussed at length during the Andean panel but Aviles did mention that Ecuador has proven a very positive venture for Innovattel, in spite of the investors’ initial skepticism with regards to committing to a country with such a troubled political situation. Innovattel built more than 200 sites in Ecuador in less than two years and recently sold 130 sites to SBA Communications but continues to work in the country thanks to its relationship with State-owned Corporación Nacional de Telecomunicaciones (CNT) and Claro.

Briefly commenting on Chile, Torres Andinas’ Ensor noted how the notorious Law 20,599 made it impossible for towercos to be compliant and basically inhibited significant further investment in the country.

Conclusions

Just over a year ago towercos were looking at the Andean region with enthusiasm and expectation, yet we are now facing the first wave of challenges for tower markets like Colombia, Peru and Chile. The tower industry might be heading towards a phase of rationalisation and consolidation in the Andean region but it’s our belief that the outcome could only be positive for long term players truly committed to changing the shape of the local telecom market.

The Andean panel highlighted the tensions between MNOs’ desire to get new sites built at the best possible prices, often in difficult areas, and the towerco business model, which favors building

sites in attractive locations where multiple tenants can be attracted. When Entel’s call for towerco business model innovation is juxtaposed with the emerging key theme of the TowerXchange Meetup Americas 2016: that towercos must exercise discipline in contractual terms, building only the right sites at the right prices, you can see a gap in the market emerging for a business model and technical solution that makes economic sense providing service to a village with 1,000 population, unreliable (if any) grid connection, and declining ARPU. A single tenant tower can be a negative asset on the balance sheet, but if MNOs need a certain number of single tenant towers built, but have outsourced their own build capacity, who is left to build the “uneconomic” towers necessary to meet coverage obligations?

“ “And since Peruvian towercos don’t seem eager to commit to new

technologies just yet, Entel recently deployed their own In-Building

Solutions (IBS) to cover main malls… A lot of business that Entel

wasn’t able to be outsourced to third parties due to lack of appetite


Brazil: there is light at theend of the tunnelRather than focus on short term challenges, the industry must remember why the Brazilian tower market is great in the long term

The slowdown in demand

The current state of the Brazilian economy has had an inevitable effect on demand for new sites and co-locations. Panellists agreed that these tough economic conditions are posing serious challenges to carriers who are forced to reduce their capex, considerably shrinking the volume of business for towercos.

On one hand, the devaluation of the Brazilian Reais has impacted towercos expatriating funds out of the country, whereas on the other hand, towercos seeking to reinvest Reais in Brazil are struggling to do so in light of the reduced spending of carriers over the past twelve months, and the growing gap between buyer and seller valuations of independent developer portfolios.

Phoenix’s Giusti stressed that while Brazil is a large country with a considerable gap in terms of existing versus required infrastructure, 2016 is unlikely to be a positive year for the telecom industry as a whole. In fact, as a result of the macro-economic challenges, carriers are being more disciplined about their investments and exploring new forms of site deployment, which is resulting in a slowdown in network growth.

One way to protect towercos is to have strong underlying MLAs that guarantee continuity to the business. Although this aspect is once again being challenged by Oi who filed for a record US$20bn bankruptcy protection on June 20, days after the end of the Meetup. The impact of Oi’s bankruptcy - the largest in the history of Brazil - on the towerco

Read this article to learn:< The origins and impact of the slowdown in demand on the local tower industry

< Oi: the elephant in the room goes bankrupt

< Where is the growth for Brazil towercos?

< Simple rules not to be forgotten: discipline, creditworthiness and sustainable prices

< Why do towercos like Brazil after all…

The Brazilian panel held at the third annual TowerXchange Meetup Americas was moderated by Jonathan Dann, MD at RBC Capital Markets who run a thought-provoking session thanks to the contributions of Peter Bendall, SVP at Macquarie Group; Jim Eisenstein, Chairman and CEO of Grupo TorreSur; Mauricio Giusti, CEO of Phoenix Tower do Brasil; Andre T. Laloni, Managing Director, Head of Brazil and Southern Cone within UBS; David Porte, VP International at SBA Communications; Douglas Silva, Head of Operations Brazil at American Tower; Tom Staz, Managing Partner within Brazil Tower Company; and Aniko Szigetvari, Global Head of the TMT Group at IFC. Here is a summary of key findings from the 90-minute panel on Brazil, its current turmoils and future opportunities.

Keywords: 4G, American Tower, Americas, Brazil, Brazil Tower Company, Build-to-Suit, Capex, Carve Out, Claro, Co-locations, DAS, Grupo TorreSur, IFC, Investment, LTE, Lease Rates, MLA, Macquarie Group, Market Overview, Oi, Phoenix Tower do Brasil, Private Equity, RBC Capital Markets, Regulation, SBA Communications, Sale & Leaseback, Small Cells, South America, Telefónica, Telesites, Telxius, Tenancy Ratios, UBS, Vivo

Peter Bendall, SVP, Macquarie Group and Jim Eisenstein, Chairman and CEO, Grupo TorreSur


ecosystem and on the overall telecom landscape is yet to be clear since the company has sixty days from the filing to present a reorganisation plan for the approval of its creditor, thus a rescue plan may yet emerge.

But even before Oi’s potential collapse, panellists agreed that 2016 wasn’t going to be a strong year for build-to-suit (BTS) activities and that 2015 ended up on a positive note only thanks to projects lagged from the previous year. On a positive note though, panellists stressed that this crises is to be treated as a temporary adjustment, and the industry needs to be patient since there are still tremendous growth opportunities in the Brazilian wireless market.

Disciplined towercos and creditworthy carriers

Drawing a parallel with the United States, panellists

recalled that when the carriers landscape changed and the number of U.S. operators shrunk to four, the tower industry initially expected this to have a negative impact on the business but then found itself doing business with bigger and stronger players.

So while Brazil now faces the consequences of Oi’s bankruptcy, it’s important to remember that the number of carriers in a given market is less crucial than the creditworthiness of long term contracts with those carriers.

SBA’s Porte added that towercos with a long term view can only see Brazil as a very good market. In fact, while the short-term might remain “lumpy”, the future will present plenty of opportunities for the tower industry. Present times definitely pose challenges especially since most of TIM’s BTS activity is being developed by American Tower and

Telefónica is focused on hoarding capital to its HQs back in Spain in order to pay dividends, hence is not deploying much network capex for the time being. But this will change since carriers will eventually go back to deploying more heavily, and they will need as much help from third parties as possible when the market normalises.

And while towercos wait for the market to get back to normal, the key factor that will determine their long term success is their discipline and adherence to the key principles and value of the tower business: working with quality in mind, ensuring paperwork is complete and correct, and negotiating strong contracts is what will make the industry succeed in Brazil and globally.

Where is the growth?

The panel went on to discuss the growth opportunities especially for private equity-backed firms that are now approaching their five-seven year anniversary (which often coincides with their exit). And while everyone agreed that consolidation among towercos is very likely, it seems clear that until the market conditions stabilise, many deals will remain on hold.

Times of forex volatility usually put a stop to transactions and this might require PE-backed companies to extend their horizons beyond the usual timeframe of their lifecycle. This may be unavoidable since it could be very tough in today’s economy to achieve the multiples upon exit which many set out to achieve.

Douglas Silva, Head of Operations Brazil, American Tower, Mauricio Giusti, CEO, Phoenix Tower do Brasil and Jonathan Dann, Managing Director, RBC Capital Markets


Even if right now the whole telecom sector is being affected by macro as well as industry-related challenges, the panel that how data demand is still at its infancy, with 4G penetration around 10% and a long way to reach its full potential. According to the IFC, future investments to build the infrastructure needed in the near term could amount to US$3-7bn, meaning that in spite of the current outlook, it’s only a matter of time before market conditions improve and delayed projects are resumed.

In spite of its troubles, towercos stressed the positives of Brazil; its potential for future growth and high returns in comparison with regional standards. And this is particularly true for the likes of Grupo TorreSur and Brazil Tower Company that have looked beyond the country, but haven’t foundgood drivers to expand elsewhere.

One of the challenges related to the slowdown is that Brazil is now host to a wide array of build to suit (BTS) focused firms, with some of them too small to leverage any scale and struggling to get any business. So the temptation to drive prices down and beat the competition on the few projects being assigned in the country might be high. While driving BTS prices - as well as lease rates - down might offer some short term benefits, it will be value destructive in the long run especially for those towercos looking for a relatively quick exit at high multiples.

On the same note though, the panel noted that one of the positive outcomes of the current state of the market in Brazil is that there aren’t as many new towercos entering the country as we’ve witnessed

in the past couple of years. So our hope is that those now active in Brazil realise the importance of remaining disciplined to ensure the industry gets out of this hiatus unscathed.

BTS vs co-locations

Right now, carriers might be more inclined to commit to BTS rather than co-locations especially since BTS might offer more favourable conditions for the anchor tenant.

According to some panellists, CTOs within Brazilian carriers are extremely business savvy and have tried to engineer the tower industry in their favour for some time now. So to give an example, a towerco might receive a request to build a new

site next to an existing one that already holds two tenants. The rationale behind the request might actually be pricing since the BTS project could be more convenient to the carrier than a negotiation to co-locate on the existing site. Discounted rates for anchor tenants are the norm in many countries but if and when a towerco is focused on quality and long term business, it never makes sense to build adjacent to an existing site with capacity.

Building towers with little or zero prospect of a second tenant seldom makes business sense to towercos and their investors, especially since the high multiples this industry enjoys are based on the growth potential of each individual site.

The risks of devaluing the industry is particularly

Andre T. Laloni, Managing Director, Head of Brazil and Southern Cone, UBS, David Porte, VP International, SBA Communication, Tom Staz, Managing Partner, Brazil Tower Company and Aniko Szigetvari, Global Head - TMT Group, IFC


crucial for PE-backed towercos looking for good exits. In fact, if it’s true that most towercos aim at being acquired by one of the larger entities active in Brazil, deviating from proven best practices can only undermine the likelihood of a deal with any of them.

An additional aspect that needs to be taken into consideration, especially when looking at BTS projects, is the site acquisition and permitting phase which is extremely complex in Brazil (as it is elsewhere in CALA). Certain countries are taking this matter to the extreme and literally tearing down towers built without permits. And even if Brazil doesn’t reach this point, it does present a complicated framework that requires expertise and know-how to be dealt with. So once more, working with strong partners can ensure better results and, most importantly, all the required paperwork!

While the tower industry would very much welcome a move towards simplification in the permitting process, the situation isn’t likely to change especially due to sometimes conflicting dynamics between governments and municipalities; there’s a general lack of cooperation between them. Issues related to permitting are a serious brake to deployments but

also to investments since those interested in fast turnarounds need to face the reality of dealing with the local bureaucracy.

Brazil in 2020…

Imagining the state of the market in 2020, panellists forecasted the number of subscribers in Brazil to have reached 300 million (60 million more than today!) by then, which is approximately where the United States is today. But the gap with the U.S. standards is still huge in terms of subscribers per tower (4,500 vs 1,000), average tenancy ratio (1.2/1.3x vs 2.5x) and number of sites (55,000 vs 140,000).

So if growth predictions are accurate, Brazil might need close to 100,000 new towers by 2020… And towercos to do the job!

While today’s Brazilian tower market might move slower than hoped, these predictions remind us why towercos aren’t engaging with additional services such as FTTT, backhaul and even energy. The path ahead for towercos is still focused on macro-sites, especially in Brazil, and this is particularly true

since the multiples of the tower business are much higher than those of most additional services.

Similarly, the time isn’t quite right yet for alternative types of infrastructure such as small cells and DAS and in spite of much talking, the industry is still very much focused on adding towers to coverage-hungry Brazil.

Conclusions

Upon wrapping up, the panel commented on the possible entrance of Telesites in Brazil and the recent launch of Telxius. Panellists shared the hope that these organisations can contribute to the professionalisation of the tower industry and even become potential buyers. But while their acquisitive appetite remains uncertain, one thing is clear… Telesites and Telxius should operate and act like real towercos in order to add value to the industry.

In this business, just like in any other sector, there are guiding principles with regards to creating and preserving value. And now more than ever, the Brazilian - and CALA - telecom tower industry needs strong towercos able to sail through these challenging times and be part of the next wave of growth!

Brazil needs anything between 80,000 and 100,000 towers to become a world-class telecom market and to achieve even a fraction of these staggering numbers, it needs strong and capable towercos ready to do the job at the right price and conditions

Subscribers/tower

4,500

1,000

Average tenancy ratio

1.3x

2.5x

Est. number of towers

55,000

140,000

Country/Data

Brazil

United States

Brazil vs U.S. - comparing maturity levels


How investible is Argentina?Lessons learned at the 3rd TowerXchange Meetup AmericasTower hungry and attractive, Argentina still has much to prove to towercos and investors

TowerXchange welcomed on stage Clarisa Estol, now Secretary of Investment Promotion within the Ministry of Telecommunications of Argentina, who has previously held various relevant roles within the private sector - as President of Banco Hipotecario among others - and is the first government representative publicly speaking at a TowerXchange Meetup.

Representing the towerco sector was Juan Cueria, well known to the TowerXchange’s community and currently VP and COO within Innovattel/Torresec, a build-to-suit towerco active in Argentina (as well as Colombia, Peru, Ecuador, Panama and Puerto Rico).

On the banking/investment side, TowerXchange invited on stage Miguel Ángel Arrigoni, President of Argentinian consulting and investment firm First Capital Markets and Gonzalo C. Arauz, Investment Officer TMT & Venture Capital within the International Finance Corporation.

Good time for a change

The new Argentine government took office in December 2015 and inherited a country in a very bad state. Since its assignment, the government has been working extremely hard to address crucial issues such as the fiscal debt, debt holdouts, restrictions in terms of both import and export, and heavy subsidies, while setting the ambitious goal to reduce inflation to a single digit in four years.

And if April 2016’s inflation rate rise was the highest

Read this article to learn:< The aftermath of the 2015 Presidential elections: what has changed so far

< The role of the Investment Promotion Agency within the Ministry of Telecoms

< 25,000 new towers needed in Argentina (and not enough towercos at work)

< Limitations on tower transactions in Argentina and a potential work-around

< Continuity and certainty needed to invest and commit to the country

During the third TowerXchange Meetup Americas, TowerXchange hosted a panel entirely focused on Argentina to discuss the current state and future outlook of the country’s telecom market as well as several roundtables looking at the investibility of Argentina, its challenges and opportunities. During the Argentina panel, we welcomed on stage four experts representing different sides of the local telecom ecosystem and we now report on key highlights and lessons learned from the panel as well as roundtables hosted during the two-day event.

Keywords: Albright Capital Management, Americas Insights, Argentina, Build-to-Suit, Business Case, Country Risk, Debt Finance, Densification, First Capital Markets, First Mover Advantage, IFC, Infrastructure Sharing, Innovattel, Insights, International Finance Corporation, Investment, Market Entry, Market Forecasts, Market Overview, Ministry of Telecommunications of Argentina, Network Rollout, New Market Entrant, Private Equity, QoS, Regulation, Sale & Leaseback, South America, Tax, Torresec

Clarisa Estol, Secretary of Investment Promotion within the Ministry of Telecommunications of Argentina, Juan Cueria, VP and COO within

Innovattel/Torresec, Miguel Ángel Arrigoni, President, First Capital Markets and Gonzalo C. Arauz, Investment Officer TMT & Venture Capital, IFC


in fourteen years (at 6.9% vs 3.1% in March), the jump was mostly due to the elimination of both energy and transportation subsidies in the greater Buenos Aires region.

The new government is well aware of the challenges ahead and has appointed Alfonso Prat-Gay as Minister of Economy. Prat-Gay is a forex expert who headed the National Central Bank from 2002 to 2004, when he won the Euromoney Central Bank Governor of the Year award after having reduced inflation from 40% to 5%, with an economic growth of +8%. And he isn’t the only business-minded leader appointed by Macri who chose Juan José Aranguren, former President of Shell Argentina, to lead the Ministry of Energy.

A country in need of towers

While dozens of towercos wait for “the right time” to make a move in Argentina, Innovattel entered the country before the 2015 elections and shared with the audience a few highlights of its journey.

In fact, while the BTS firm already knew most of the telecom players in the country, a strict financial due diligence was needed prior to its operational launch. For this purpose, Innovattel hired financial advisors who suggested that market was eventually going to open.

Since then, Innovattel has established its presence in the country and started working on build to suit (BTS) projects for two leading operators. Another towerco, Tower 3, reportedly owns forty sites in

Argentina but TowerXchange is yet to make direct contact with its executives.

According to Innovattel’s Cueria, operators in Argentina can barely handle the very high demand for extra capacity and new coverage and towercos are the obvious answer to the problem. But while Innovattel can enjoy a certain degree of first mover advantage when it comes to negotiating terms with operators and contributing to shaping up a towerco-friendly environment, they also faced the challenge of raising capital in a virgin market with such a troubled past.

The encounter with Albright Capital Management - as explained by Cueria - was very timely as the firm had previously invested in the energy sector in Argentina and agreed to grant a five-year term US$45mn facility to the BTS firm.

On this note, Arauz commented that the IFC started

looking at the potential of the tower business in Argentina eighteen months ago and since then so much has already changed: operators are definitely feeling more pressure and working harder to density their networks. However, while some short term concerns are less worrying, the overall long term scenario still needs to improve, especially when it comes to the financial landscape.

One of the crucial issues that will ease the entrance of new towercos in the country is the improvement and simplification of the regulatory and permitting landscape. Innovattel has been very vocal since its arrival in Argentina with regards to the gaps in the system and what would be needed for the landscape to improve. And Cueria commented that so far, authorities have been very receptive. The necessity for coverage and capacity is a crucial issue in the country with as many as 4,600 subscribers per site and by simplifying its framework, Argentina will be able to attract more investments from the private

“ “while Innovattel can enjoy a certain degree of first mover advantage when it comes to negotiating terms with operators and contributing to shaping up a towerco-friendly environment, they also faced the reality of raising capital in a virgin market with such a troubled past


sector, including mobile network operators.Greenfield projects encounter a certain degree of limitation, especially since municipalities retain a lot of power in terms of permitting. With call drops rife, the ever growing demand from society in terms of improved QoS is likely to gradually change the attitude of municipalities towards permits and greenfield projects.

According to Estol, the key is moving in the right direction rather than too fast and the Ministry is now working closely to same-party members of various municipalities to address permitting issues. A pilot project with the Buenos Aires’ municipality has already started, favoured by the fact that Macri used to be the city Mayor and has given up its role in favour of his vice after the elections.

Experts within the Ministry and other relevant bodies have been meeting every two weeks to draft a new telecom regulation which is now ready for approval by the Congress. Estol added that every other meeting includes stakeholders from the industry.

Estol highlighted that the government created the Agency for Investments Promotion with the main goal to attract foreign and private investors in Argentina and the Agency is now pushing for a law to stimulate public–private partnerships (PPPs) that could further contribute to new initiatives in the country.

The Ministry is now focused on avoiding mistakes that other countries have made and skipping any

intermediate phases to create a solid regulatory environment. In order to involve all relevant parties in the process, they are holding meetings with potential investors and operators.

There are approximately 15,000 towers in Argentina, but the country is immense and networks as they stand haven’t been able to cope with the ever growing demand for coverage and capacity. According to Cueria, each MNO has approximately 4,000 new sites planned over the next two years, an aggressive rollout that simply cannot be realised without the help of third parties especially since the local telecom industry has the capacity to build a maximum of 500 towers per year!

Innovattel noted how MNOs have so far been receptive to the idea of consolidating parallel infrastructure, but the paradigm is still shifting and some players retain a more traditional view of building their own sites as a competitive edge. In spite of operators needing the help of towercos, Innovattel admitted that its entrance in the market wasn’t easy and its first rings were sites where operators had struggled for ten years.

Argentina needs as many as 25,000 new towers to improve the quality of service which continues to lag other CALA nations due to the lack of investments. At 500 new sites per year, it would take operators about twenty years to reach acceptable standards! With three players, Claro, Movistar and Telecom Argentina, enjoying similar - and very healthy - market shares (around 30%) and without a

strong push from the regulator, not much has been done to improve the QoS even in Buenos Aires.

Taxation, indexation and inflation all pose challenges to tower sales

While the pace of build-to-suit activities is likely to pick up in the very near future, questions remain with regards to how fast operators can commit to selling their tower portfolios. In fact, as noted by Arrigoni, the sale of towers in Argentina is hindered by the high level of taxation: 35% capital gains tax among others. That said, Arrigoni continued by discussing the National Trust Law which includes a very attractive tax treatment for foreign investors.

Specifically, the structure of the trust law is similar to that of the U.S. securitisation law, which makes it a very strong tool in terms of its judicial safety. Investing via a trust structure means that the investor owns mezzanine bonds and is allowed to pay interest and dividends without having to pay withholding taxes.

IFC’s Arauz added that the IFC has been discussing tower sales with MNOs for over five years and other factors that stopped them were the impossibility to repatriate funds as well as the devaluation of the local currency. Now these restrictions are fading, while their capex is increasing, so MNOs might be more open to the idea of transferring towers to fund network deployment.

Both IFC and First Capital Markets highlighted their openness to lending capital to international


businesses looking at entering Argentina.

Another crucial limitation with regards to doing business in Argentina is the impossibility to index contracts to inflation. Indexation is illegal in Argentina and while a way around it could be to re-negotiate contracts annually, this solution might not be ideal for listed entities and their long term investors. Even if able to index, high levels of inflation would still require towercos to possibly re-negotiate contracts every six months so the goal of reducing inflation is of primary importance and a priority according to Estol.

Arrigoni stressed the fact that contracts can be negotiated in US Dollars and since the government has freed mobile network operators to raise their tariffs, this might contribute to their acceptance of contracts negotiated in US Dollars.

The tower industry needs certainty and continuity

While Argentina has embarked on a completely new journey, politically and economically, questions remain with regards to its ability to ensure continuity after the Macri’s government. Arrigoni stressed that Argentina is going through deep and radical changes that are affecting the entire society. However, via the elections Argentinians have chosen to address these macro-economics and social problems and are tolerating some much needed but tough adjustments. And even if Macri were not to be re-elected at the end of his term, the opposition seems to be relatively aligned with his forward-thinking approach.

Wrapping up, Arauz summarised the key steps the government is working on, including the much

needed solution of the holdout bonds crisis, issues related to its forex and the elimination of subsidies and subsequent adjustment of tariffs. The latter was never a popular move but, in spite of some resistances, the popularity of the government didn’t decline after it. In his own words “Argentina is in need of drastic solutions after years of reckless attitude towards the economy.”

Disclosing some of their future plans, Innovattel expects its Argentinian tower count to rise to approximately 500 sites by next year. Cueria lived in Argentina for eleven years and noted how the country has a long history of ups and downs and is now entering an “up” phase which Innovattel is planning to take full advantage of.

Thanking panellists for their participation, TowerXchange highlighted how the presence of a government representative at the event spoke volumes about the country’s commitment to change and to opening up to international investors from the telecom tower sector and beyond.

In spite of a certain degree of enthusiasm and a very promising future, we always need to remember that the tower industry operates a long term business which requires a high degree of certainty to function. Building a tower and investing in infrastructure is a solid game based on long term planning and in order to succeed in Argentina, towercos are likely to need some further reassurance which TowerXchange is optimistic will soon be offered

“ “Indexation is illegal in Argentina and while a way around it could be to re-negotiate contracts annually, this solution might not be ideal for listed entities and their long term investors. Even if able to index, high levels of inflation would still require towercos to possibly re-negotiate contracts every six months so the goal of reducing inflation is of primary importance


10 ways to create(and avoid destroying) value in independent towersWhat a strategic buyer is looking for when valuing an independent developer’s towers

The towerco market can be divided into three tiers:i) small to medium-sized towerco developers that are seeking to create value over a three to five year period before sale to the next tier of investor;ii) mid-tier aggregator companies that do some development but their main business plan is to roll up other’s assets; andiii) large towercos with long term investment horizons sometimes called strategic buyers. In CALA, the primary prospective strategic buyers in the latter group are the large international towercos; listed entities like SBA Communications and American Tower. Some entrepreneurs hope that Telesites and Telxius may also be prospective strategic acquirers, although neither has yet executed a transaction beyond their parent MNOs’ portfolios. Portfolio valuation risk It is dangerous to assume that if someone simply creates a towerco it will be worth a lot of money. Barriers to entry can be low and there is a lot of money chasing the segment: private equity firms are seeing an ever-growing number of would-be tower entrepreneurs who claim they “know a guy who can get me 500 great search rings.” But not all tower builds and towerco business plans are investible. It’s tempting to think that if a tower is built for US$80,000, it will be possible to quickly increase tower cash flow to US$1,500 and then achieve a successful exit. But in reality things do not operate as simply as that and a growing number of financial investors are finding out the hard way

Read this article to learn:< What investors should look for when evaluating the investibility of independent developers

< Why valuation comps can be misleading

< How to create and protect value in the BTS contract and MLA

< Building smart – building to maximise value

< Why FCPA compliance is a MUST if you want to sell to a listed entity

Whereas once the tower transaction pipeline in CALA flowed freely, the volume of deals has slowed in the past months as a growing gap has opened up between the valuation expectations of independent developers and those of the strategic investors to whom many had hoped to sell. How do the strategic buyers value independent developer portfolios? How can that value be enhanced? What portfolio characteristics erode value, and how can they be avoided? SBA Communications’ VP International David Porte hosted a roundtable on this topic at the TowerXchange Meetup Americas 2016 – here’s what we learned.

Keywords: Acquisition, Active Infrasharing, Americas, Americas Insights, Bankability, Best of TowerXchange, Build-to-Suit, Capacity Enhancements, Co-locations, Construction, Country Risk, Due Diligence, Exit Strategy, Infrastructure Sharing, Insights, Investment, Investors, Lease Rates, Leasing & Permitting, Loading, MLA, Masts & Towers, Novation of Leases, O&M, RANsharing, Regulation, Risk, SBA Communications, Site Level Profitability, Tenancy Ratios, Towercos, Valuation

SBA Communications, VP International, David Porte


that their projected investment returns may not become reality. The past frothiness of the tower market, particularly in the Americas, risks causing some investors to either fall asleep at the wheel or make fundamental valuation errors when trying to create value from startup to exit. Too many investors and independent developers are focused on growing their tower count, rather than focusing on what creates high return on invested capital. Strategics don’t buy towers by tower count, they buy them based off of their individual return. Two towers built for US$80,000 can be worth vastly different exit values even when they produce the same initial cash-flow. Much of the actual value comes from projected future cash flows conditioned on the risks that endanger those projections. If those projected future cash flows are low and/or the risks are medium to high, a company’s assets may end up being worth less than the initial development cost. The danger of the assumed trading multiple The mathematics of evaluating a tower business seem deceptively simple. They are not. Many investors are duped by the pitch that a company’s exit value is simply equal to Current TCF multiplied by the trading multiple of public tower companies. What investors need to understand is that all cashflows are not created equal; tower companies base their offer on growth in cashflows, not just current cashflows. And investors need to

understand that public companytower multiples have little relation to the value of acquisitions since public tower stock multiples are based on a completely different set of assets than those being acquired. Very few deals in emerging markets have ever traded at multiples close to the public towerco values. What most developers do not understand is that the multiple is an OUTPUT of the model, not an input, which is why every tower transaction trades at a different multiple. When evaluating an acquisition, the price paid is based on the current plus projected cashflows conditioned by the opportunity and risk factors of the market and currency. Every tower is different and every transaction tends to be different; the comps are seldom really

comparable. Some companies will purchase one tower portfolio at 10x TCF and another at 19x TCF depending upon a wide variety of circumstances. Multiple comps must be referenced to the same tower in the same kind of place with the same kind of agreements – a task that is impossible for the investor to perform. Hence, multiples signify the output of an entire process and are meaningless in isolation, when projecting a future valuation. Here is a quick example that shows just how deceptive a multiple may be. A brand new tower with one tenant, well built, with solid agreements, ground leases and permits may trade for a multiple higher than a publically traded company tracks. The same tower three years later will trade for a significantly lower multiple if the owner has already captured the potential growth via adding

“

“

We’re partners with investors. If your portfolio companies are building good sites with good cash flow, we can pay good money to acquire those sites, enough for all stakeholders to make a good return. But if the towers and the contracts aren’t good enough, we aren’t going to pay. We use our own valuation models to offer a fair price. SBA Communications has closed over 900 transactions – we have created many happy sellers! – David Porte, VP International, SBA Communications


additional tenants and now there is no growth left for the acquirer. The absolute dollars the seller receives will be higher but the overall multiple will be lower. Further, a mid tier aggregator may purchase a newly built site for a 19x multiple only to see an offer of 14x or less later on because the acquirer’s valuation model is built on projected cashflow – not on some magical multiple that is always paid for tower cashflow. Getting the anchor rate right In essence, when evaluating towerco cashflows, the anchor tenant rate is important if it is too low. SBA has seen some anchor rates be as aggressive as 30x what it takes to recover the capital to build the site. However you see many developers cut very low-cost deals with operators to get sites and be surprised that at a realistic exit multiple they have covered less than half the initial capital to construct the site.

In some cases, to simply break even, some

developers have to add a second tenant to every other site since the sites with one tenant are worth less than what they paid to build them. This might leave the towerco needing to achieve a tenancy ratio of two to satisfy investors’ return expectations – and that may not be realistic in the given timescale and market conditions where the maximum realistic lease-up is only two. This can also lead to cannibalisation of co-location lease rates as some developers become desperate to add any tenants they can find at any price, making it even harder to get any return. This challenging situation is compounded by the pressure that towercos are under to build in lower quality locations where a second tenant is difficult to secure. This means investor capital will need to be more patient and the lower the time-based return is to the investor. Discounts and other anchor tenancy concessions While the anchor tenant rate is obviously a driving factor in TCF and valuation, many other factors are considered when valuing a portfolio.

A number of concessions given by developers to anchor tenants in the recent past dramatically drive the value of the site down when they go to sell it. Some quick examples: < The anchor tenant is allowed almost unlimited space on the tower, 1) making the effective space available on the tower for other tenants less than optimal and 2) zeroing out all potential growth from lease amendments from the anchor tenant. In one case a developer gave an anchor a right of first refusal on all space with a very low cost, effectively giving the anchor veto rights on all new tenants!< The anchor tenant receiving a share of additional revenues from a second or third tenant driving down the potential future cashflows.< Having non-first-tier operators as anchor tenants, reducing the long-term expected cashflow security for the site.< Free RAN sharing allowing the anchor to gain all value from certain co-locations with the towerco receiving no value from their investment.< Early termination rights that put the cashflows at risk and reduce their value dramatically. Location location location When valuing a portfolio, strategics look closely at the location of a site to determine its potential lease-up. A tower built in a rural area that must be covered by only one operator may be worth very little. A tower built next to another tower may be worth less than the cost to build. A tower built in an area

“ “The spread over ground rent on the anchor lease matters more than any other costs. When evaluating portfolios we don’t use the seller’s costs; we use our own models – David Porte, VP International, SBA Communications


that has few restrictions on new site builds is worth less because someone else can build next to it in the future. Once again, the value of the tower is based on its uniqueness and desirability. For example, in some markets, to build as many towers as they can to satisfy the investors targets for sites built, some developers take rings from operators that are closely adjacent to existing sites. Operators like to do this because they can often get a better rate as an anchor tenant than from an existing site and better terms since the small developer wants to grow. What actually happens is that the new tower is a money-loser for the investor because the potential lease-up for that site is zero with the tower worth much less than the cost to build. Lease rates on new tenants Towercos need to be aware of market rates and not over-charge to try to make up for what they lost on the anchor rate. Some towercos charge rates as high as US$2,500 over ground. In many instances the strategics have learned that operators will wait until the portfolio is sold and then demand price concessions from the new owner. In one market it is rumoured that one towerco is having to give away sub-$100 lease rates for co-locations to average-down the overall rate from a previous portfolio purchase. Strategics have learned this lesson and apply a heavy discount for over-market rates. In general, strategic buyers are reluctant to value over-market lease rates at face value, as they feel

they will probably be normalised eventually. If it’s too good to be true, towercos and their investors should expect to be called on it. Could the towerco mitigate this risk by creating a different brand or subsidiary? This suggestion was met with some scepticism: the wireless industry is too small to “play cute”. Transportability Towercos also need to be aware of exploding swap and other MLA provisions. For example, if the anchor tenant is granted 10% transportability within a towerco’s portfolio, that may not seem problematic within the context of the independent developer’s small portfolio. But if that independent developer wants to sell to a larger strategic towerco like SBA or American Tower, that transportability clause might then apply across a much larger portfolio. A strategic buyer would then have to enter into complicated negotiations post-closing to mitigate the potential damage, but generally demand the seller re-negotiate their leases to remove this provision. In some cases, towers with this provision are stranded with the developer and can never be sold. Permits Investors and independent developers should always consider the importance of permits. In some markets it is possible to build and operate sites without permits until someone asks, but in

others permits are absolutely essential from the outset. An investor should never think they will receive close to full value for a tower that does not have all its necessary permits, even if that is a standard practice in the country. Without proper permits, the future cashflows and leaseup capability of a site are severely at risk, once again making the site worth far less than if the company had obtained the permits in due course. Investors should never believe a developer that says “don’t worry about it – no sites have permits.” Brazil is a fine example. The same operators that built their sites without permits and sold these towers to towercos and now demanding to see the permits of the sites they sold without them. In another instance, an investor was assured by management that the company had “all the permits necessary to start construction” which was technically true since you can always build a site without permits – but you may have to take it down at some point and/or expect a heavy purchase price discount when the site is put up for sale. Therefore, it is advisable for towercos to spend both time and money permitting all sites before construction or quickly fix unpermitted sites once built. You need to have a comprehensive checklist of the permits required for each site because your perspective buyer will. A large towerco might spend US$15,000 or more per site obtaining a complete set of permits – but the cost of cleaning up a portfolio can be only one small part of the value destruction.


For example, one towerco that didn’t have permits is paying huge per-month fines, while another was forced to take down 100 sites. In addition, in some countries towercos are unable to add additional tenants to their towers without a full set of permits. RANsharing Under extreme pressure by their investors to build sites, too many developers are giving away RANsharing rights for no additional fee. TowerXchange is aware of at least one operator only offering build to suit contracts if unlimited RANsharing is granted in perpetuity. A prospective buyer would forecast significantly depressed future lease up potential of a tower built under such terms, resulting in a very low economic value. Investors need to understand the value implications of granting such concessions to operators given that this essentially transfers almost all of the potential economic value to the operator for free. In some markets operators try to use technical language to obtain RANsharing without the developer noticing. Thus it is critical to clearly define RANsharing, otherwise towercos run the risk that their tenants claim that what they are doing is not really RANsharing. In the end, any allowance for a tenant to use their lease to host another operator, either physically or virtually, takes away from the value of the owner of the site. Developers and their investors need to understand that frequency-hosting is as economically damaging as physical sharing and if they allow it, the site value is dramatically lower.

Ground leases Good ground leases are the foundation on which the TCF of the tower is secured. Ground leases have to be long-term and renewable solely at the option of the tower owner. Rates need to be within market and not renegotiable. A tower where you cannot secure the long-term rights to the ground is worth far less with some developers seeing their sites be valued at 5x because that is all that is left on the ground lease. Likewise, agreements that give the landlord a share of future revenues may make securing the ground easier for the developer, but then all future cashflows are discounted in the acquisition model and so the site does not receive full value. Securing a right of first refusal on the purchase of the underlying property and not allowing for the assignment of credit rights is also important to mitigate against the current or future threat of ground lease aggregators. Without these provisions strategics will pay less. Developers must include provisions for the assignment of the ground leases without landlord consent - especially if the seller will need to sell their towers in an asset transaction. If the developer forgot this important provision (and we have seen this more than once) the value of the tower is stuck until the developer can get the leases assigned and has to incur all the costs and risks associated with the ground owner having another bite at the apple.

Country-based risks Another major risk factor facing towercos in many countries is foreign exchange. There have been because a number of failed or aborted transactions because the investor valuation expectations weren’t met because of negative foreign exchange movements at the time of the proposed sale or the devaluation of their portfolio based on future negative foreign exchange movements against the USD. Buyers, sellers and investors should condition their models to foreign exchange risk. In acquisition models, strategics factor in forward projections of currency movements and so in a country that has good organic growth of 10% with a foreign currency exchange devaluation projected to be 7%, the effective USD growth becomes 3%. If the spreads are even narrower the forecast might even be negative growth. Developer investors need to realise they are investing as much in the currency as they are in the assets. On top of FX risks, taxation, regulation, and siting restrictions play a very large part in how much the portfolio is worth. In countries with the inability to increase the depreciable value of the sites through the acquisition or tax towerco revenues heavily, the TCF will always be recalculated to include all those taxable costs. Market structure is so important that it sometimes baffles the strategics that investors often ignore it! If you invest in a market with one dominant operator and two struggling operators, it is inconceivable


that a majority of the sites will ever get all three tenants. A portfolio’s lease-up is made up of an aggregate of sites. Some get only one tenant, some get two and in some markets with three or four strong operators they may get three. But averaged out a portfolio may have only 1.5 TPT (tenants per tower) with the three-tenant sites helping the averages a lot. What is generally seen in markets dominated by a single operator, the maximum expected tenant count may be less than 1.5 TPT limiting the value of the portfolio severely. Foreign Corrupt Practices Act The Foreign Corrupt Practices Act (FCPA) matters; this is a binary issue for listed towercos – they won’t buy a portfolio that lacks 100% FCPA compliance. If there are small deviations from FCPA, it is best to disclose them in advance because they can and will derail a sale process. In countries where there are weak legal and regulatory frameworks there may be a temptation to accelerate permitting and build processes via backhanders – towercos must resist acting in this manner as it can prohibit the divestiture of their entire portfolio and strand the investment. The aggregator conundrum To date, consolidation of the developer tier sites into the middle aggregation tier of companies has been patchy. There is growing concern that in a growing

number of cases the aggregation buyers are paying substantially more than the strategics are willing to pay. Both the strategics and the aggregators bid on the same portfolios. This calls into question the aggregator’s business plans. This imbalance suggests that the aggregator’s assumptions are divergent from the strategics and many will have to wait a substantial amount of time to see if their more aggressive assumptions hold true with a high of cost funds. For example, some purchasers are paying 19x earnings when the strategics and past market are only willing to transact at 13x in CALA. This indicates that some buyers are betting on the market rebounding – unless they have a different means of calculating value. “We have outbid a listed towerco twice,” countered one independent developer, “we felt we had a better view of co-location potential, and we’re happy with

the outcome. A mid-tier aggregator towerco can make good returns if they have better information.” The aggregator is faced with two significant issues that their investors should be wary of:1) Why does my management team believe they can grow the portfolio faster than the strategics?2) Why would the strategic pay a significantly higher multiple for the same portfolio three to four years from now if they aren’t willing to pay that multiple now? In his session, Porte contended that there was a substantial flaw in this argument that goes to the very core of calculating value. A quick example will suffice. If a towerco is willing to buy a portfolio at 13x and an aggregator buys it at 19x, to earn back the differential and aggregator would have to add 46% more TCF than was in the strategic’s

“ “Nobody has a magic formula to reduce the cost of building a cell site. If an independent developer is building much cheaper than the larger towercos, it’s because they’re cutting corners – David Porte, VP International, SBA Communications


acquisition model. If the strategic’s model contained the assumption that a tower portfolio would grow from 1.3 TPT to 2 TPT in five years, the aggregator would need to have three TPT to break even. This assumption is not believable in markets with three or less possible tenants. Aggregators that rely on the special sauce that they know more about the market than the strategics who generally operate in the same market, need to be challenged by the investor. While strategic investors may be more conservative, they generally are well within the band of expected values for growth. And, as proven above, the amount the strategics have to be wrong by to make up for the valuation difference is too large to play a significant factor in the final transaction value. But if the action is not in the growth assumptions, but mainly based off of a belief that strategics are willing to pay a higher multiple to an aggregator

than to a developer, this is where the model really breaks down. What drives the business model for the aggregator is really the promise that 1,000 sites should intrinsically be valued more than 100 sites. That site quality, security of cash flows and growth doesn’t really matter. At SBA we caution investors that while there may be a value premium associated with aggregation, when they assess deals they should value the exit at the multiple the strategics bid for the portfolio or at times slightly less if the aggregator paid for the future growth the strategic won’t see. The quality of the underlying asset doesn’t change because of scale. Since there have been so few aggregators trade, there are not a lot of data points to rely on. However, in one instance a player has demonstrated that strategics were willing to pay only a small premium for aggregated sites. After

aggregating two large portfolios and one small acquisition for a blended cost of slightly above 10x, the company ran a sale process and sold to the winning bidder – a strategic – for slightly more than 12x TCF (tower cash flow). The important data point is that the strategic bidders for the portfolio were trading at multiples close to 19x but only offered 12x or less. The bids were based on the quality of the portfolio, not on the trading multiple of the acquirer. Investors should base their exit plans on how good their sites are, not on how public towercos are valued. There has yet to be any other aggregator of size trade in Latin America, while a number of processes have been delayed or aborted due primarily to the fact the sellers couldn’t meet their target return thresholds. Since the value created by aggregators over and above the value included in the models the strategics use when bidding on the same portfolio is not an appreciable driver, and the assumption that strategics will pay a significantly higher multiple for aggregated sites over-and-above what they used in the initial sale process is equally flawed, it is surprising that so much money is chasing this segment with no data available to predict a positive outcome. So, what are your teams doing? Because of the past, many investors see the title of “towerco” and throw money at the business plans believing that no one loses money at towers. They

“ “SBA Communications has a standing offer to help other companies in the Americas with build to suit contracts, MLAs and ground lease agreements. We won’t show you ours, and you don’t have to show us yours, but we can help to drive value – David Porte, VP International, SBA Communications


fall asleep at the wheel and won’t realise until too late that they may not be investing in towers that are worth anywhere close to what they thought. They pressure teams to deliver site counts rather than quality returning assets worth a lot to a strategic.

Investors in developer and aggregator companies should closely examine and govern the capital allocation of their investments, understand the details and actively participate in the investment because in the end, strategics want to pay good money for good towers

10 conclusions

1. The value of a towerco is as much in the contracts as it is in the steel and dirt

2. Valuation comps can be misleading: every portfolio – every tower – is unique

3. A lot of the concessions anchor tenants will ask for can be value destructive, particularly those

concerning reserve space on the tower and on the land

4. Towercos must have well-drafted clauses governing RANsharing

5. Buyers, sellers and investors must condition their models against foreign exchange risk

6. Cutting corners on permitting, build and maintenance to improve margins doesn’t increase

valuations: every large towerco understands what towers really cost

7. 100% FCPA compliance is a MUST if you wish to sell to a US listed entity

8. The aggregator business model is risky given the gap in valuation assumptions strategics have for

the same portfolios

9. All prospective acquisitions are in competition for capital from large towercos – not just with other

tower portfolios for sale, but also in competition with towercos’ opportunity to pay down debt or

buy back stock, so returns have to be strong to the acquirer

10. The internal rate of return (IRR) on capital invested is important but it’s not the sole factor in

defining M&A strategy. Country risk and foreign exchange risk might mean a 15% IRR is palatable

in one market versus 23% in another

Buyers will tend to seek out high quality opportunities. They want to buy quality assets at a fair price.

A better quality of asset translates into a long stream of cash flow with fewer headaches. Buyers and

sellers should appreciate that they are operating in an industry where valuations can be quite baffling

Meetup Americas 20177-8 June, Boca Raton Resort and Club, Boca Raton

A unique networking opportunity with 250 leaders of the CALA telecom tower industry

www.towerxchange.com/meetups/meetup-americas


Ground lease management: maximising the value of the land under CALA cell towersLessons learned from the round table at the TowerXchange Meetup Americas 2016, including insights into ground lease aggregation in the region

Ground lease aggregators in CALA Ground lease aggregators seek to acquire the land under the most profitable cell towers, typically by offering the landlord a lump sum buyout. It can be a painstakingly slow process, literally going door to door, landlord to landlord, rolling up real estate. On balance sheets, aggregating land leases looks similar to the towerco business model itself: long term recurring revenues from credit-worthy tenants. Furthermore, the aggregation and sale of large portfolios of land leases to towercos represents an obvious potential exit. However the practice can erode margins for towercos and create animosity in landlord-carrier relationships. Some of the largest ground lease aggregators in the U.S. have explored opportunities in CALA, including AP Wireless, TowerPoint Capital and Unison Site Management. Towercos themselves are also acquiring the land under some of their towers, despite lease costs often being a pass through: “I try to secure the land under my towers to give the carrier more security,” said one participant. The ground lease aggregation business in CALA is immature and varies from market to market. Land aggregators like Gryps and AP Wireless have been relatively active in Brazil. “One ground lease aggregator has been sending out teams to knock on doors, another has placed an ad in the paper enticing land owners to call,” observed one round table participant.

Read this article to learn:< How the ground lease aggregation model works

< The prevalence of ground lease aggregators in CALA

< Whose balance sheet is at risk from ground lease aggregators?

< Why buy the land under your own towers?

< How to protect the land under your most valuable towers

While ground lease costs remain the primary operating expense for tower networks in CALA, in most markets, lease costs are a pass through to the tenant. However, we have started to see some MNOs seeking to share lease costs with their towerco partners, while other towercos have sought to acquire the land under their most strategic towers to increase security – particularly against the growing threat of ground lease aggregators.

Keywords: Americas, Americas Insights, Asset Register,

Brazil, Chile, Colombia, Costa Rica, Due Diligence, Ground

Lease Aggregation, Insights, Lease Rates, Leasing &

Permitting, Mexico, Novation of Leases, Pass-Through,

Puerto Rico, Site Level Profitability, ValuationRoundtable moderator Michel Buhler of Terra Towers


While in Brazil there are such problems with lease registration such that it’s not always possible to tell who the landlord is, on the other hand some landlords have reportedly struggled to know who to call about telecom structures on their land, and frustrated landlords are more inclined to sell out to lease aggregators. “Land aggregation isn’t as easy outside Brazil,” said one participant. “In Brazil you can’t buy real estate at a good price once a tower is on the site – valuations can increase six times!” While the lease aggregation model has been applied to Brazil, in contrast Mexican real estate law reportedly is less favorable for ground lease aggregators. This is because stakeholders – potentially including the tenant – have to approve the transition of ownership, which limits growth opportunities for aggregators in Mexico. There has been some limited ground lease aggregation activity in Mexico, but not on the same scale as Brazil.

Similarly, if you record your interest in the ground lease in Colombia, any lease aggregator has to respect your company. However it is a complicated process to register interest, and you need landlord co-operation. Where towercos are inheriting sites from carriers, they inherit a complex ball of problems, which can risk leaving the portfolio exposed to ground lease aggregation for a window of time. Again there are a handful of ground lease aggregators in Colombia, but their impact to date has been minimal. “We haven’t seen much activity from land aggregators in Peru – none of the recognised companies, only a few individuals looking at this,” said one participant. “We’ve seen some land aggregation in Chile,” said another participant, “but it’s complex to get a new site: it can take six to eight months to get permits. With community and camouflage obligations, there are significant barriers for entry.”

“While in Mexico the towerco I worked for had AP Wireless buying the land under our towers, setting their own terms and working against us, which became an acrimonious relationship. In the U.S. there can also be an acrimonious relationship between towerco and ground lease aggregators, although there have been some instances of ‘friendly’ ground lease aggregators with which the towercos have been able to create a co-operative relationship,” added another round table participant.

In general it was felt that the ground lease aggregation business was significantly less mature in CALA than in North America – crucially no round table participants had yet encountered ground lease aggregators hiking up lease rates and asking for payments, which was the point at which the practice

“

“

In general it was felt that the ground lease aggregation business was significantly less mature in CALA than in North America – crucially no round table participants had yet encountered ground lease aggregators hiking up lease rates and asking for payments

Reported sightings of ground lease aggregators in CALA

AP Wireless Brazil, Mexico, Chile and Central America

Gryps Brazil

InSite Puerto Rico

Tower Alliance Partners Colombia

Telecom Lease Advisors Puerto Rico

TowerPoint Capital Brazil and Puerto Rico

Unison Site Management Colombia


really started to affect the U.S. tower market. Whose balance sheet is at risk from ground lease aggregators? With lease costs still a pass through in Brazil and Mexico, and shared between however many tenants are on the site, carriers are exposed to this risk. But if the MNO negotiates a robust contract with limitations on ground lease price increases, or seeks to share the cost of the ground lease with their towerco partner, towercos cease to be insulated from this risk. Buying the land under your own towers “We look at it as investing in our own assets – it’s more secure to buy land under my own assets,” said one participant. “Value is derived from the lease term, cash flow, tenancy ratio, attractiveness of location; investing in the land under our assets means increasing cash flow and reducing expenses.” “The difference when towercos do this compared to land aggregators is that we’re not motivated to ratchet up prices,” said one towerco. “We’re happy for towercos to be the landlord,” added an operator. “If you can’t buy the land, will you pre-pay and extend the lease?” Asked one participant. “In some markets there is a limitation – it depends if we want to add opex or spend capex,” replied one participant. “In the U.S. there was a tax shield from pre-payment of the lease, so if you bought the land you couldn’t depreciate it,” added another.

Hot

Warm

Cool

Heatmap of ground lease aggregation activity and opportunity



“Towercos can’t buy all the land under the towers; a significant proportion of landlords aren’t interested. It becomes a question of whether to allocate the resource to land aggregation, or do I just let a land aggregator do it?” Concluded another participant. Dealing with landlords It is always important to do the due diligence to ensure you’re paying the real landlord, and if towercos and MNOs can register their interest in the land it can increase valuation – so it is important to look at towers one by one. It is important to have a right of first refusal (ROFR) on the acquisition of the land in your contract, but even if your landlord sells to a land lease aggregator, are you going pick a legal fight with a rural landlord? Access to capital for land acquisition “We acquire as much land under our towers as we can find willing sellers – we don’t set a maximum, although we prioritise higher cash flow sites – as long as we’re meeting our hurdle rate, the CFO will be happy,” said one towerco. “In the absence of amazing M&A opportunities in CALA, we have cash so it’s a great to deploy capital on own assets. We don’t like land aggregators because they reduce our ability to deploy capital,” added another participant.

“We started to prioritise sites based on revenue, initially as a protective measure against what happened in U.S. The sweet spot for land aggregators might be suburban, secondary cities as in many cases it might not be able to buy land under first city sites. Our strategy extended beyond buying land – we also extended leases,” added a third participant. Conclusions Some CALA markets are attractive for land aggregators, others less so. If it’s too easy to relocate a tower, or if the towerco and/or tenant can register their interest in the site, the land aggregator is disempowered. Savvy land aggregators target specific high value sites; not every site in your

portfolio is at risk, but towercos would be well advised to protect the land under their highest value sites. Ground lease aggregators will convert any minor default in your contract into a sustainable position, so it’s essential to have a well drafted contract with a decent ROFR. A small disclaimer to this article: TowerXchange are tower industry analysts – ground lease aggregation is a parallel industry which we touch on, but don’t study in as much detail. Therefore, we don’t have the usual volume of contextual information around this article and, as such, you should treat the content of this piece as a partial snapshot based on the opinions and experiences of a dozen telecom real estate stakeholders at the recent TowerXchange Meetup Americas

Site aggregation model One company participating in the round table operates an extensive site aggregation model in Brazil – a different approach from ground lease aggregation whereby the rights are secured to a portfolio of potential telecom sites. “We go after big companies with vast real estate: banks, drugstores and other retailers. We have signed 120 contracts securing the rights for interested operators to deploy infrastructure on 22,000 sites, shortcutting the site acquisition process,” said the site aggregator. “We see a significant opportunity in small cells – 65% of our properties are in urban areas, on which over 40 small cells are already located. It’s not as capex-intensive a business as the US$100,000 plus it costs to build a macro tower. We lease from the landowner and when there’s demand from the operator, we have the right to sublease. Leasing land to the telecom industry isn’t our clients’ core business and it’s not their priority; our proposition represents additional revenue without any cost to them. If the operator wants a tower, we build it and we own it; it’s like a build to suit done the opposite way – from ground up!”


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TowerXchange Meetup Americas 2016 Post Event Report · TowerXchange Meetup Americas 2016 Post Event Report Insights and findings from the third annual gathering of 200+ CALA telecom