Navigating the Evolving Landscape of TowerCos in Europe

TowerXchange x Small Cell Forum 2024 Observations

As the telecommunications industry in Europe continues to evolve, one cannot ignore the significant role played by TowerCos. With approximately 70% of telecoms real estate now under the purview of TowerCos, it's evident that they have become a force in the market.

Following my time at Tower Xchange and Small Cells World Summit last week alongside Cornerstone CEO Pat Coxen and CNO ANDY TRAIN , here are some of my personal reflections on the nuances of TowerCos and their impact on the telecommunications landscape, exploring various models, regulatory concerns, market trends, and prospects:

1) Diverse models and market dynamics

• The European telecommunications landscape boasts a range of TowerCos, each operating under different models.
• At least four models have been identified in the market – from active TowerCos managing radio infrastructure to InfraCos overseeing passive fixed and mobile infrastructure, the emergence of NetCos offering complete Network as a Service, and broadcast-oriented companies adding further diversity to the ecosystem.

2) Regulatory considerations

• While regulators may show concern about reduced competition, it's clear that mobile operators remain incentivised to compete on coverage.
• Access terms for TowerCos can be structured to foster competition in mobile networks and services, ensuring a balance between efficiency and competitiveness.

3) Addressing regulatory challenges

• Historically, mergers in the telecommunications sector have prompted regulatory scrutiny, leading to conditional access terms to prevent price discrimination and maintain competition.
• Competition law serves as the primary mechanism for addressing such challenges, with structural or behavioural remedies aimed at preserving market dynamics.

4) Regulatory expectations and market growth

• With the Gigabit Infrastructure Act ("GIA") expected to govern dispute resolution and facilitate greater access and deployment opportunities in European Union markets, TowerCos are poised for continued expansion. In the UK and Europe, TowerCos have witnessed substantial revenue growth, with 11B EURO growing to 13B EURO for just the top 4 companies in the market from 2020 to last year, outperforming the telecommunications sector at large.
• However, return on capital employed varies; high leverage due to bonds issued to finance acquisitions in some, puts a less than 1% return in the last year and the best in class at more than 6% annual return on capital employed.
• Organic growth and ‘sticking to the business plan’ was a key theme from many presenters on a panel of investors presenting their views.

5) Technology partnerships and customer focus

• At the Small Cell Forum initiatives such as standardising maximum permissible exposure and identifying areas with poor coverage and performance for launching special-purpose area networks underscores the industry's commitment to enhancing connectivity and addressing specific user requirements.

6) Evolving trends in 5g deployments

• Despite lower forecasts for 5g standalone and private wireless deployments compared to previous years, there are signs of progress.
• Technology partners are transitioning from neutral hosts to "superhosts", streamlining internal processes and reducing deployment times.
• This transformation is facilitating densification efforts beyond traditional macro-grid real estate, particularly in major UK and European capitals.
• As the industry adapts to evolving technologies and consumer demands, we can expect further advancements in 5g deployment strategies.

7) Future opportunities

• Looking ahead, TowerCos are exploring new revenue streams, particularly from Small Cells and Distributed Antenna Systems, with estimates of as much as 10% of turnover by the end of the decade from these new streams.
• By seeking customer feedback and fostering partnerships with technology providers, TowerCos aim to unlock value and drive sustainable growth. Additionally, advancements in technology are reshaping deployment strategies, with densification initiatives gaining traction in major European capitals.

The evolution of TowerCos in Europe reflects the dynamic nature of the telecommunications industry. While regulatory challenges persist, TowerCos continue to innovate and adapt, driving efficiency and enabling widespread connectivity. By embracing emerging technologies and fostering collaborative partnerships, TowerCos are well placed and ready to evolve telecommunications infrastructure.

I am excited to witness the transformative impact of TowerCos and look forward to the continued growth and evolution of the industry through Cornerstone .