Issam Darwish, Executive Vice-Chairman and CEO, IHS Group: Interview

Interview: Issam Darwish

What trends are you seeing in the expansion of network towers in recent years?

ISSAM DARWISH: Africa has around a billion people, and the population is young and expected to double in the next 30-40 years. Voice penetration in Nigeria is about 65%, compared to 125% in Morocco or Northern Europe, indicating huge potential. There is massive room for growth in voice, and data is materially underexploited. Everyone wants a smartphone now and wants to communicate with apps, so they need a reliable data pipeline. The demand is there and the case is clear, but it still needs to be enabled. To blanket Nigeria with coverage another 15,000-20,000 towers are needed. With the challenges in Africa – power, security and logistics – operator construction of network infrastructure has become an obstacle to growth. Many operators are selling their assets on to third parties in order to focus on marketing and improving subscriber services. The capital raised by the sale of network towers is consistently being used for capacity building in areas like 4G.

What strides have been made in effective tower sharing by mobile network operators (MNOs)?

DARWISH: MNOs started building infrastructure based on pockets of demand. When one tower went up, another MNO would follow. That is why there are so many places in Lagos where three or four towers sit within 100 metres of each other. Four towers cost around $200,000 each, plus the costs associated with running diesel generators – about $3000 a month. This is very inefficient and illogical. To resolve the situation, many of these towers need to be knocked down and a single tower shared. As we are completing the MTN and Etisalat acquisitions, there is a strong case for consolidation – something MNOs will not do on their own.

In 2007-09 it took a lot of work to convince an operator to share its tower infrastructure. Today, if an operator decides to build 1000 sites this year, they will immediately survey what is already available to share. No one wants to fund capital expenditure and add costs if they do not have to. The sharing of towers among operators is a win-win situation for everyone.

How can tower expansion in Nigeria’s rural areas be made a commercially viable proposition?

DARWISH: Operators do not want to go into rural areas on their own because it is simply not commercially viable. Why should they spend $200,000 for a tower and $3000 a month on fuel when a site cannot generate enough revenue to make a return? With sharing between three or four operators, it does start to make sense. There are solutions we have implemented in Cameroon and Côte d’Ivoire to encourage sharing that are working, but tower expansion has not happened 100% in Nigeria, because there are still massive capacity demands in the cities. Operators have not tackled the issue or been pushed by the regulator.

How can more efficient energy solutions help decrease operating costs for towers?

DARWISH: The power supply remains our biggest cost component and more efficient energy management is allowing us to reduce diesel consumption. Over the past five years, total costs for tower operations have probably dropped by about 20-25%. We have, over the years, experimented with many solutions. Most diesel generators are run on alternating current, so the rotation does not slow during the night when traffic is lower. However, we now have direct current generators that do just that. We have also used solar panels, but these do not work everywhere. It is important to adapt the design to the site. We are building Africa’s largest network operations centre, with 400 technicians monitoring locations in Nigeria at all hours. They can tell if gates are open or if the air conditioner is on, check diesel levels and assess how much fuel is being used, leaving nothing to chance. Towers go down all the time, yet in a pre-paid market, customers have paid their bills, so if service is not delivered, operators see a direct loss of revenue. Thus, it is essential to improve their up-time.