Network operators have profited multiple times from the introduction of 5G. The latest revenue growth is generated by so-called tower companies (towcom) as 5G technology requires denser infrastructure and more mobile towers to improve coverage and increase data transfer speeds. Communication towers are used for placing antennas, transmitters, and receivers, enabling telephone, internet, and television signal transmission over long distances. It is estimated that the global market for tower companies will be worth $28.48 billion this year, and by 2029, its value will grow to $32.75 billion.
According to GSMA, an association representing the interests of mobile network operators worldwide, by the end of last year, 252 commercial 5G networks in 86 countries served more than one billion 5G connections, and by the end of the decade, more than five billion such connections are expected globally, which also means an increase in the number of tower companies.
Intense competition
In Europe, competition is intensifying in the acquisition and merger of such companies. Investors want to take advantage of the fact that the European Union intends to ensure access to 5G networks in every populated area by 2030, as well as the EU’s Gigabit Infrastructure Act. This law stipulates that landowners must lease land to tower companies for the placement of towers ‘under fair and reasonable conditions’. This has further angered farmers who are protesting across the EU for other reasons, who until now could charge for leasing land to tower companies at prices they wanted. According to an analysis by TowerXchange, 70 percent of European telecommunications stations are now owned by tower companies, and last year marked the peak of their mergers and acquisitions.
Other players in the market of Central, Eastern, and Southeastern Europe have been preempted by the Telekom Austria Group, which operates A1 Croatia. It separated its towers back in 2021 into a separate company, EuroTeleSites, which thus came into possession of towers in Bulgaria, Croatia, Serbia, Slovenia, and North Macedonia. Furthermore, British Actis acquired 1,800 telecommunications locations from Telekom Srbija and continues to plan acquisitions in the Balkans. Deutsche Telekom (DT) recently completed the separation of its infrastructure in the Czech Republic into T-Mobile Infra CZ and is in the process of separating its Slovak towers. This company also owns towers in Romania and is now considering to whom it will sell them. Hrvatski Telekom, which operates under DT, has so far remained on the sidelines of the turmoil in the tower market, has its own towers, and has no comment on events in the tower sector.
Region attractive to Arabs
In addition to large Western tower companies, companies from wealthy Middle Eastern countries are also interested in towers in Central, Eastern, and Southeastern Europe. The PPF Group from the UAE announced last year that it would acquire majority stakes in its assets in Slovakia, Hungary, Bulgaria, and Serbia, while United Group, which operates Croatian Telemach, sold its TowerCo company in Bulgaria, Croatia, and Slovenia to Saudi Tawalu, a subsidiary of the STC group, a leading ICT infrastructure company in the Middle East and North Africa.
– By selling telecommunications towers, United Group followed an already present trend of separating and monetizing mobile telecommunications infrastructure in Europe and around the world, but this business decision did not affect Telemach’s daily operational business and the technology we use. We continued to use the same poles that are now owned by Tawalu, and the active radio equipment remains owned by Telemach – they stated from Telemach.
Lucrative infrastructure sharing
According to data from the Croatian Regulatory Authority for Network Activities (HAKOM), in Croatia, there are 2016 self-standing antenna poles on which base stations of public mobile communication network operators are installed, owned by these and other infrastructure operators. Their users are public mobile communication network operators, public interest and safety services, broadcasting network operators, radio broadcasters, and other users of the radio frequency spectrum. Currently, there are 1,365 self-standing antenna poles on which equipment is installed for only one operator and 651 on which equipment is installed for two or more operators.
Access to towers is regulated by Article 65 of the Electronic Communications Act, which obliges every operator to provide access to its electronic communication infrastructure, including antenna poles. Companies that build towers can also be network operators (even if they do not operate in the electronic communications sector) and are obliged to provide access to their infrastructure for the installation of components of high-speed electronic communication networks under fair and reasonable conditions, including price. Such infrastructure sharing facilitates the introduction of mobile networks, attracts investments, and reduces costs.
Where others won’t
In addition to HT, TowerCo, and EuroTeleSites, the Croatian state company OIV manages towers, with 350 of various sizes and purposes. In addition to using them for their own needs for distributing radio and television content through various platforms, their users also include telecommunications operators and others.
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— – The information and communication technology sector is exceptionally dynamic and crucial for the growth and development of the entire Croatian economy. In 2022 alone, this sector grew by 16.9 percent, and similar growth, ranging from 10 to 20 percent, is expected to continue over the next five to ten years, with natural fluctuations and occasional stagnations. By the middle of the next decade, the contribution of our ICT sector will likely be equal to or perhaps even more valuable than the contribution of the tourism sector to the overall Croatian economy. In this large and rapidly growing industry, there is room for all Croatian ICT entrepreneurs. OIV is just a small but extremely important part of this entire growth mosaic. We like to say that it is the generator of growth prerequisites, that is, the one that enables expected development. For example, by building quality ICT infrastructure, high-capacity broadband networks throughout the territory of Croatia, and not just in highly profitable urban areas, OIV, with the help of EU structural funds, enables the development of the ICT industry in geographical areas that strictly commercial operators consider less or not at all attractive in terms of infrastructure. Building such infrastructure is a prerequisite for constructing antenna poles and next-generation base stations. It is very expensive, and due to fewer users in those areas, the infrastructure is low-profit. By building such infrastructure, OIV will enable the growth of the ICT industry across the entire territory of Croatia, including islands, villages in Slavonia, Lika, and Banovina. Paying attention to cost-effectiveness and profitability, the company diversifies its business while simultaneously creating prerequisites for the digitalization of public administration, the economy, and society in all parts of the Beautiful Croatia – says the CEO of OIV, Mate Botica.
In forests and borders
In addition to large tower companies, smaller ones also operate in the Croatian market, such as Markoja, known for Ecopol, the first wooden tower in Croatia, erected in Podcrkavlje in Slavonia. The pole manufacturer is the Finnish company Ecotelligent, and the investor is Markoja, the only authorized distributor for wooden poles in Croatia and the region.
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— The director and owner of Markoja, Boris Markoja, states that they are currently building another tower in the vicinity of Zagreb; it will be the second such tower in Croatia and the fourth in the world. It is made of laminated veneer lumber (LVL) that can be fully recycled and meets all Eurocode and Croatian quality standards; its lifespan is up to one hundred years.
– We are in the midst of a strong investment cycle in new communication poles that will cover areas that have not been the focus of interest so far: forests, agricultural land, borders, private networks for industry. One Ecopol can ‘host’ up to four telecoms, and we cooperate with all three national operators: Hrvatski Telekom, A1 Hrvatska, and Telemach. We offer services to all interested national and regional telecoms, as well as firefighters, police, local government units, state bodies, and state infrastructure operators such as railways, highways, Janafa, and Plinacra – explains Markoja.
Why wood when metal
According to him, the price difference between metal and wooden towers is currently minimal, but as Ecopol emits half as much CO2 as metal poles, and emissions of that gas are becoming an increasing problem, he believes that wooden poles will be significantly cheaper than metal ones due to carbon taxes and better conditions for green financing. A wooden structure tower can be up to forty meters high, and if a higher structure is needed, the company also builds metal ones. When it comes to the price of land use on which the towers are placed, it depends solely on direct agreement with the landowner. – Ecopol is a unique wooden structure product without competition in the Croatian market. Considering that the construction of poles will be very intense in the next few years, we believe we can help achieve goals by partnering with other companies that build towers, such as TowerCo – says Markoja, adding that until recently, in Europe, eighty percent of towers were owned by operators, and twenty percent by tower companies; in the United States, the situation is reversed.
However, this is gradually changing, and he expects the continuation of the separation of part of the business with poles into separate companies for more efficient resource management and rapid growth in line with the increased spread of 5G networks and capital raising for investment in 5G. He also assumes that the market will consolidate in the next five years.
