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The importance of independent TowerCos in Europe

Neutral telecommunication infrastructure operators are currently playing and will continue to play a crucial role in the development of wireless technologies in Europe

Neutral telecommunication infrastructure operators are currently playing and will continue to play a crucial role in the development of wireless technologies in Europe, with quantifiable monetary profits and social benefits thanks to the greater efficiency of their installations and the value of the concept of infrastructure shared among different operators.

The recent report entitled “The Economic Contribution of the European Wireless Infrastructure Sector,” written by Ernst & Young and the European Wireless Infrastructure Association (EWIA), highlights the sector’s increasing importance in the European market. The study outlines the value of neutral operators, which have gone from a market share of 17% in 2018 to 39% in 2023, with forecasts of reaching 50%. These figures underscore their increasingly important role in the optimization and efficiency of the network infrastructure.

In fact, companies like Cellnex are proving to be essential in not only improving mobile networks’ coverage and capacity but also facilitating the transition to emerging technologies like 5G and freeing up mobile operators from billions worth of investment to handle the constant technological challenges.

The study estimates that neutral operators buying towers has allowed mobile network operators (MNOs) to free up €26b since 2018, a figure that has been decisive in allowing MNOs to reinvest this money in emerging technologies, like the rollout of 5G networks and improvements in the coverage of communication services all over Europe. Plus, the report also estimates that with a tower outsourcing rate that could reach 50%, another €28b could be freed up.

“Greater outsourcing to independent TowerCos was estimated to release €28b of capital, which MNOs can reinvest in their networks, such as to improve coverage and accelerate 5G rollouts,” the report says.

In addition to the economic benefits, independent TowerCos also afford significant advantages in terms of efficiency and sustainability. Co-location in existing towers lowers the need to build new infrastructures, which reduces the environmental and visual impact. This approach not only optimizes operating costs but also contributes to a quicker and more efficient rollout of the networks. The constant investments in new implementations and maintenance, like the €2b per year reported since 2021, prove these companies’ commitment to sustainable, efficient development of network infrastructures. “Independent TowerCos are playing a key role in enabling 5G rollouts and the continued expansion of mobile network coverage … EWIA members alone have invested €2.0b p.a. CapEx in new deployments, site reinforcement and maintenance since 2021".

The digital divide

“Cheaper and faster rollout to rural areas helps to address the digital divide,” says the report in relation to the inclusion and social cohesion that are two of the goals of this digital revolution on which Europe is embarking.

Companies like Cellnex are playing a vital role in improving connectivity in rural areas that are less economically attractive for mobile network operators. TowerCos’ ability to lower costs and optimize infrastructure is crucial in these areas, where the rollout costs are high and revenue opportunities limited. They allow for better coverage and connectivity, ensuring that rural areas are not left behind in the digital revolution.

“Independent TowerCos play an important role in enabling the telecom industry to make most efficient use of its passive infrastructure. The higher utilization rates of independent TowerCos reduce the cost per user, lowering the threshold at which it becomes profitable to improve service coverage,” the authors of the report say.

The analysts believe that eliminating duplication and managing infrastructures more efficiently also leads to a more affordable pricing system for consumers. “Sharing towers with multiple tenants reduces overall cost for mobile operators, helps improve coverage and reduces consumer prices.”

Despite everything, the sector is still facing significant challenges that require attention and adaptation. Market competition and consolidation are crucial factors, with forecasts for increased competition between MNOs and independent TowerCos. According to the study, this dynamic may lead to greater consolidation and changes in investment strategies in a context in which regulation and government policies will remain essential, especially in aspects like co-location and the rollout in rural areas, which require a balance between economic efficiency and equity in access. The swift evolution of wireless technologies like 5G and future innovations pose both challenges and opportunities. Companies in the sector have to update their infrastructures and adapt to the new connectivity demands in an environment in which the climate emergency is dictating a reduction in the environmental impact of infrastructure.

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