Business

Tower sharing grows, costs stay high

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A telecom transmission tower on top of a building in Kampala, Uganda. Picture: Morgan Mbabazi

A telecom transmission tower on top of a building in Kampala, Uganda. Picture: Morgan Mbabazi 

By ISAAC KHISA, The EastAfrican

Posted  Saturday, November 17   2012 at  14:10
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Telecom companies in Uganda have maintained their tariffs on Internet and voice services despite outsourcing tower sites to reduce operational costs and consequently lower user charges.

Orange, Warid Telecom and MTN, which have outsourced their towers, argue that operation costs in the country are still high and that they will not reduce user charges soon. Voice calls in Uganda average Ush4 ($0.0015) per second off-net and Ush3 ($0.0011) on-net.

“There’s no impact on our tariffs because everything is going up,” Orange Uganda CEO Philippe Luxcey said, adding that the company’s operating expenses, including salaries and daily operational costs, are still high.

In addition, telecom companies, like other sectors of the economy, are still adjusting to the after effects of high inflation rates. According to the Uganda Bureau of Statistics, the country’s year-on-year inflation rate slowed to 4.5 per cent in October from a revised 5.5 per cent in September 2012, but it had peaked at 30.4 per cent in October last year — an 18-year high.

Similarly, the Airtel group plans to transfer its tower portfolio to its own separate tower company, Bharti Infratel Ltd, to manage its towers. UTL remained silent on the new developments.

Last month, British cellular tower specialist Eaton Towers secured $60 million in debt financing to acquire nearly 400 new telecommunications towers from Warid Telecom in Uganda.

The fund is also intended to help upgrade the existing towers, and build up to 80 new towers, to increase efficiency in service delivery countrywide. Eaton Towers now owns 700 telecom towers in Uganda, having acquired 300 from Orange Uganda early this year.

In December 2011, MTN Group and American Tower Corporation entered into an agreement to establish a new joint venture tower company in Uganda — ATC Uganda. The company then acquired MTN Uganda’s 1,000 towers for $175 million. In addition, ATC planned to build 280 towers for MTN by 2014, as well as tower sites for other wireless operators in the country.

Shailendra Naidu, the chief commercial officer of Warid Telecom, said his company has partnered with experienced players to manage towers, so that the telecoms concentrate on the delivery of services to its consumers.

Mr Naidu said Warid plans to put up 120 more towers by the end of this month in addition to its 500 towers, to cope with the increasing number of subscribers.

Tower sharing in Africa has become an efficient way for mobile operators to reduce operating costs by locating antennas on the same tower.
South Africa, Nigeria, Ghana, Tanzania, and Democratic Republic of Congo are some of the countries where telecom companies have outsourced towers to benefit from shared costs of power, maintenance and security.
Tower sharing also allows operators to compete fairly and reach more subscribers, especially in remote areas as well as reduce unnecessary duplication of masts and their associated infrastructure in the country.

According to the Global System for Mobile Communications (GSM) report titled Powering Telecoms, Uganda, Kenya, and Tanzania had 13,225 towers as at the third quarter of this year, and are expected to reach 22,317 by 2015 at a 19.1 per cent annual growth rate.
Uganda has 3,067 towers, Tanzania has 4,593 and Kenya has 5,565.

The report said only 9,957 towers in the three East African countries are connected to the commercial grid power supply. The remaining 3,268 towers are off-grid and located in areas without access to grid power, relying on fuel for their operations.

The increasing number of subscribers in the three East African countries, currently at 70.98 million, is putting pressure on the telecom companies to become more efficient in service delivery and remain profitable.

Uganda and Tanzania recorded a growth rate of 5.3 and 4.4 per cent over the last year, reaching a subscriber base of 15 and 26.8 million respectively.

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