Network- and tower-sharing activity has flattened in the last 12 months, per Ovum's new report Network & Tower Sharing Analyzer: 1H16. A drop-off in passive tower/site-sharing deals has been offset by strength in fixed access and active RAN/spectrum sharing. By region, Asia accounts for 39% of annualized deals (3Q15–2Q16), from 21% the prior year; India's seven deals in 1H16 alone made it a global hotspot, while Brazil, Thailand, the US, and the UK each had at least three deals in the same timeframe.
Telcos turning to carrier-neutral providers for network assets
Over the last decade or so, telcos have developed various types of network- and tower-sharing arrangements to lower costs (capex and opex) and improve coverage. The sharing of infrastructure by otherwise competing carriers has become commonplace in most countries. Physical and legal structures have evolved to allow the sharing to be practical for multiple parties, and to minimize risks (such as equipment sabotage by rivals). Regulators have encouraged sharing, sometimes by simply not banning it, sometimes by reorganizing the market to facilitate sharing (as with the creation of China's new tower company).
At the same time, a formal sector of carrier-neutral providers (CNPs) has emerged to focus on operating and selling access to towers and data centers. Companies like SBA Communications in towers, and Equinix in the data center space, have grown rapidly over the last few years through M&A and purchase of telco assets. Consequently, the CNP sector's revenues hit $33bn for the last 12-month period (3Q15–2Q16), up 11% YoY. Telco revenues in the same timeframe saw negative growth.
Seventy-nine contracts signed in 3Q15–2Q16 period
Ovum's review of industry tower- and network-sharing activity suggests new deals may be fading. Total signed contracts in this area were 79 in the year ended June 2016, flat YoY. First-half deals were also flat, at 29 for both 1H15 and 1H16. By type of deal, asset divestments (e.g. tower spinoffs) with lease-backs are down, joint ventures are flat, while outsourcing/leasing deals are up. The largest type of deal, sharing between operators, remained about 50% of the total, accounting for 39 of the market's 79 signed deals. Some recent operator sharing deals of note include: Telenor's fiber-sharing deal with PTCL in Pakistan (March); Celcom's backhaul and high-speed broadband fiber access deals with Telekom Malaysia (January); Telefonica's spectrum-sharing agreement with Nextel in Brazil; and an LTE base station–sharing deal between Megafon and Vimpelcom in Russia.
One clear story this year is a regional shift: annualized signed contracts in Asia were 31 through June 2016, from 17 the year before; the other three regions declined in the same timeframe. That pushed Asia to nearly 40% of global deals. South and Southeast Asia has been strong recently, led by India and Indonesia. Focusing just on this year, Europe saw a modest uptick from 8 deals in 1H15 to 10 in 1H16; Asia jumped from 7 to 13 signed contracts, while both the Americas and MEA saw less activity.
A shift to fixed?
Also important is a possible shift to fixed access and fiber-focused deals going forward. Mobile-only sharing deals remain the majority of what we track, but the momentum is behind fixed and integrated fixed-mobile operators.
Tower-focused sharing has largely migrated over to the CNP sector, which mobile telcos lean heavily on for piecing together their networks. By one count (Towerchange.com), CNPs now own about 65% of the world's cell towers; many mobile operators also share through ad hoc deals with competitors. Fixed networks are more of a sharing greenfield. In the last 12 months, fiber grew from 10% to 15% of total contracts as the primary "sharing technology." That ratio remains small, but will likely grow. Telcos needing to beef up their fiber networks may prefer to just build, but sharing will also be used due to the scarcity of capex. Some CNPs, such as Crown Castle, recognize this need and are acquiring fiber assets or building organically.
Network & Tower Sharing Analyzer: 1H16, TE0006-001287 (September 2016)
"Telco revenues grow 1% in 2Q16, first uptick since 3Q14, but cost crunch continues," TE0006-001275 (August 2016)
"ICPs report strong 2Q16; full-year capex approaching 7% of revenues," TE0006-001269 (August 2016)
"Carrier-neutral provider revenues grow 12% in 2Q16, data center buildouts benefit," TE0006-001273 (August 2016)
Optical Networks Update: Data Centers are Reshaping the Market, TE0006-001262 (July 2016)
Microsoft and Facebook to build the Marea subsea cable, TE0017-000068 (July 2016)
Global Data Center Analyzer: 2Q16, TE0017-000067 (May 2016)
"Cable, FMC, infrastructure, and the cloud drive 1Q16 M&A," TE0006-001228 (May 2016)
"Vendors are making strides selling network solutions to non-telcos," TE0006-001206 (March 2016)
"Fiber network consolidator Zayo snaps up Viatel," TE0012-000562 (November 2015)
Matt Walker, Principal Analyst, Intelligent Networks