Telecoms to outsource tower sites to cut costs

Wednesday March 21 2012

Eaton telecom towers, the company that will manage part of Warid’s telecom tower assets.

Eaton telecom towers, the company that will manage part of Warid’s telecom tower assets. 

By Faridah Kulabako

The increasing operational costs arising from a volatile economic environment have forced telecommunication companies to opt for outsourcing tower site services to cut costs and remain competitive in an industry that has witnessed the fiercest price wars in recent times.

The trend of selling off tower sites, where telecoms have been incurring huge costs so as to provide communication services, was ignited by MTN which last December sold approximately 1,000 tower sites for about $175 million to American Tower Corporation (ATC), a USA-based company in a joint venture with South Africa’s MTN Group.

Telecom woes
Telecoms have been grappling with increasing operational costs arising from a spike in fuel prices, depreciation of the shilling, inflationary pressure and persistent power outages amid low call tariffs due to competition, slimming their revenue margins substantially.

The latest to join is Warid telecom, which has announced the sale of its tower portfolio in Uganda to Eaton Towers.

In the deal, Eaton Towers will acquire and manage up to 394 of Warid Telecom Uganda’s existing telecom tower assets and other passive network infrastructure, at a cost yet to be known.

Warid Uganda chief executive officer, Mr Sriram Yarlagadda, said that the deal will reduce both the telecom’s operating costs and capital expenditure and enable it concentrate on its core business including transmission, branding, marketing and improved service delivery.

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Unlike the MTN deal where ATC was to acquire a 51 per cent stake in the venture and 49 per cent for MTN Group, the Warid deal that is expected to close in the first half of this year will see the telecom cede 100 per cent ownership to the buyer, making it a pure tenant.

The costs of running and maintaining a tower site are one of the highest in providing telecom services.

fkulabako@ug.nationmedia.com

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