One of the interesting things about the technology space is that it is always changing. Change, usually in the form of innovation, gives rise to not only new technologies but also new business models and new market participants. One market dynamic which has been prevalent for several years that has become more active in recent years is the role of the Neutral Host.
Macro Towers
In essence the Neutral Host /Tower Co owns a piece of telecommunications infrastructure that can accommodate 1 or more mobile carriers. This has traditionally been in the form of a macro (outdoor) tower that a telco can install its carrier specific equipment (antennas) on and connect its radio base station (RBS).
The Neutral Host will either identify a location itself, for example in a new housing estate, or be given a number of locations by a carrier who is looking to increase its network footprint. The Neutral Host will then look to secure a location commercially, negotiating with landlords and/or developers, to install a telecommunications tower ready for a carrier to install their antennas and a RBS. Once they have secured the location they then look to rent space on the tower to the carriers recovering their costs and making a margin over the tenure of the lease arrangement.
The Neutral Host is typically responsible for
- managing the relationship and the commercial arrangements with the property owners/agents,
- installing/erecting passive mobile tower and rooftop infrastructure if not already installed
- perform maintenance on the towers to ensure their ongoing structural viability, and
- manage their commercial arrangements with the carrier/s.
In recent years, as Carriers sought alternate methods to fund the rollout of their 5G networks the option to sell the towers the carriers had previously installed and owned that they now had on their balance sheets became a viable option. As a result, we saw all three of the Australian mobile carriers transfer significant values (partial ownership) in the towers to Neutral Host/ Tower Co entities.
Telstra established an entity, now called Amplitel and transferred most of its tower assets to this entity. They then sold a 49% stake to a 3rd party consortium with Telstra retaining 51% providing significant funding to support the 5G network rollout and change the profile of their balance sheet. Amplitel is Australia’s largest mobile tower infrastructure provider owning over 8000 assets.
Optus established ATN (Australian Tower Network) and along with the merger of Axicom formed an entity now branded Indara to hold a number of the towers which are leased back to Optus and is majority owned (70%) by Australian Super. The remaining 30% is owned by SingTel (Optus parent). Optus have also more recently engaged an independent Neutral Host company Waveconn selling them a number of sites (340) and engaging them to secure further sites as part of their network rollout.
TPG (Vodafone) sold a number of towers and rooftop infrastructure to Waveconn (previously Omers) comprising approximately 1200 sites. Indara also host a number of sites and lease space to TPG for their equipment
Distributed Antenna System (DAS) Infrastructure
Unlike the passive tower business model where the Neutral Host has the opportunity to accommodate multiple carriers on the one passive piece of infrastructure and derive a margin from rents from the carriers, the evolution of the business model in the Distributed Antenna System (DAS) sector has been unsuccessful to date. The DAS sector provides indoor mobile coverage to larger commercial infrastructure like commercial buildings, shopping centres, hospitals, hotels, airports, stadiums etc.
The main driver behind the failed adoption of the business model in the DAS sector was the shift around 5 years ago where the funding of indoor coverage infrastructure became the responsibility of the landlord rather than the mobile carrier/s. This has been a painful transition for many landlords with the cost of new DAS solutions and carrier connections in the range of $1m – $5m subject to the size of the property and the solution opted for by the landlord. With only one source of funding for these projects the question of 3rd party infrastructure ownership becomes a simple financing question.
Telco Access Services (TAS) provide a full suite of services for landlords operating commercial properties that regularly interact with Telecommunication Service Providers. TAS supports its landlord clients in evaluating proposals by carriers for infrastructure installations on their properties including solutions designs, proposed agreements and LAAN documentation.