Vodafone says it is preparing to spin out its cell towernetwork, Spark announced similar plans a month ago. Why isthis happening?
Spark took the wraps off its plans to establish SparkTowerCo when it announced its half year result inFebruary.
At the time Spark New Zealand Chair JustineSmyth said: "…in the second half Spark intends toestablish Spark TowerCo to improve the utilisation andcapital efficiency of its passive mobile assets and open upopportunities to introduce third-party capital.”
SparkCEO Jolie Hodson says establishing a TowerCo would“…improve the performance, utilisation, and capitalefficiency of its passive mobile assets”.
This weekVodafone announced a similar plan. The company’s partowner Infratil told investors last month plans for a towerspin-off were at an advanced stage.
On Monday Vodafonesaid it has engaged Barrenjoey and UBS to advise the companyon a sale. The company’s press release mentions thepossibility of using sharedinfrastructure.New Zealand’smobile operators are late to the tower sell-off game.Vodafone Australia sold 140 of its towers 14 years ago in2008. Since then there have been many similar deals aroundthe world.
The logic is straight-forward. In the fibreera, mobile phone towers represent the bulk of a telco’scapital investment.
Towers can account for a large sliceof operating costs. Spinning them off and renting them fromtower companies and, in some cases, from rival operators orthe tower companies set up by rival operators, can cutcosts.
More importantly, these deals can boost margins.That looks like delivering better value forshareholders.
The move can be a step on the path to sharedinfrastructure. This was controversial at one time but thesuccess of the Rural Connectivity Group which builds sharedmobile infrastructure for the three mobile companies hasremoved any fear from not owning towers.
While mobileoperators might not want to share wholly-ownedinfrastructure with rivals, that is not going to worry atower operator. Indeed, they will woo potentialbusiness.It’s worthmentioning that at an earlier stage in nationwide mobileroll-outs, networks of towers had strategic value tooperators. With coverage approaching 100 percent ofcommercially viable sites, that’s no longer the case.There is no competitive advantage in owning towers in2022.
There’s another angle to consider. Over timehigher frequency spectrum will become available for 5Gnetworks. Higher frequencies require greater tower density,that means more towers. A lot more towers. Getting that costoff the telco balance sheet and establishing sharedinfrastructure now will make that a less dauntingproposition for mobile company shareholders.
Europeanmobile companies have raised billions of dollars sellingtheir towers. There are plenty of willing buyers with largebusinesses building up international tower portfolios.It’s an attractive proposition for them because they haveguaranteed long term tenants.
The deal will see RNZ remaincommercial free. TVNZ will stay commercial but would nolonger pay a dividend to the government. It appears themerged business will be a not-for-profit operation.
Samsung remains top brand with 19 percentmarket share. Apple remains in second place head of Xiaomi,Oppo and Vivo in that order. The remaining companiesaccounted for 32 percent of all units shipped. Their sharecontinues to fall, last year they represented 40 percent ofthe market.
Rival research company IDC has similar numbersfor the brands while putting the market increase at 5.7percent.
Dell’Oro Groupsays the worldwide SD-Wan market grew 35percent in 2021 as enterprise customers optimised networksfor cloud services. It hit revenues of over US$2 billion.Cisco is the market leader with Fortinet in second place,VMware, Versa and HPE are the other top five brands.
AtReseller News Rob O’Neill reports on boomtimes for New Zealand’s tech sector. Stats NZsays sales of software and services are up 39 percent overthe last two years.
Download Weekly: Cell towers on theblock was first posted atbillbennett.co.nz.
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Bill Bennett publishes technology news and features that are directly relevant to New Zealand readers.Covering enterprise and small business computing, start-ups, listed companies, the technology channel and devices. Bennett's main focus is on New Zealand innovation.Bill Bennett stories are republished on Geekzone and Scoop.Stories published on this site are available to publishers for a fixed fee or a monthly subscription.