Communications infrastructure construction rises before decline

In the first half of the year, more antenna mast structures (AMS) were built in Russia for the infrastructure of telecom operators than in the entire 2022. Following the consolidation of 2021–2022, small regional players are re-entering the market. But the growth of the segment will be complicated by changes in the exchange rate and the key rate, as well as a decrease in investments by telecom operators, so players expect a slowdown in infrastructure construction and the pace of network development.

A Kommersant source on the market of independent tower companies shared estimates of the development of the segment in the first half of the year. It follows from them that the number of facilities put into operation increased in relation to the entire 2022 by 3.2%, to 98.1 thousand AWS. In 2022, there were 95 thousand objects in operation, which is 2% more than in 2021 (93 thousand).

According to Kommersant’s interlocutor, the market shares by number of objects were distributed as follows: 33% for the New Towers Group of Companies (uniting Vertical, Russian Towers, First Tower Company), 24% for the Tower Infrastructure Company (BIK) MTS , 20% is occupied by Service-Telecom (including the Independent Tower Company), 18% by the Tele2 Pilar structure, and about 5% by regional companies.

According to AC&M analysts, the total number of AMCs in Russia is “at least 97 thousand.” and increased in 2023 by “at least 1.9 thousand,” which is comparable to the fleet expansion for all of 2022, but inferior to the growth rate in 2019-2020. Among the factors for the market slowdown, AC&M cites the saturation of the capital region’s facilities, as well as sanctions that “forced telecom operators to work in conditions of an unprecedented equipment shortage.” “Traffic servicing in the largest agglomerations has become a priority, and the creation of new facilities to expand coverage is being postponed until better times,” the company explains.

AC&M notes that after industry consolidation, “dozens of small AMC owners with portfolios of 10 to 600 properties are reappearing on the market,” which makes valuation difficult. Thus, the new tower company was founded by the ex-general director of Russian Towers Alexander Chub, and New City Services also launched on the capital market (see Kommersant on December 15, 2022 and February 15).

Market participants themselves speak rather about factors constraining its development. “Changes in the exchange rate and the key rate negatively affect the cost of constructing facilities and owning them,” explained General Director of the New Towers Group of Companies Evgeny Chermashentsev. “This affected both infrastructure operators and telecom operators. For the latter, the question of the feasibility of investing in their own passive infrastructure becomes more pressing.” As a result, the development of the market of independent players will be more dynamic, he believes, expecting, however, that by the end of the year, compared to 2021, there will be “a multiple decrease in construction, and therefore the rate of development of networks in general.” Based on the results of the first half of the year, operators have already reduced investments in networks (see Kommersant on August 23).

Service-Telecom, however, claims that the company is “fulfilling its objectives.” “At the end of 2023, the portfolio under management will amount to 20.4 thousand objects. The growth of the TR (Tenancy Ratio, number of tenants per tower) indicator to 1.4 in 2022 corresponds to the expected parameters,” they explained. New Towers clarified that the average TR in the market is 1.3–1.5.

Tele2 estimated the market for tower assets at more than 100 thousand objects, specifying that RTRS and Rostelecom are also major owners of tower infrastructure. The operator believes that the “potential massive development of 5G-generation networks” would be a significant factor in infrastructure growth. “With regard to TR, it is necessary to note the trend towards the introduction of equipment sharing (Active RAN Sharing – a telecom operator places its equipment and allows another market participant to share it). This allows us to provide customers with high-quality communication services, including under conditions of sanctions pressure and temporary difficulties with the supply of equipment,” Tele2 added. MTS declined to comment.

“Operators are really starting to discuss sharing more actively. But there are no major sharing projects yet,” notes Alexey Slukin, editor of the specialized Telegram channel Telekommunalka. In the future, he believes, there may be projects by operators to jointly cover a network of highways (see Kommersant, June 10) – the Ministry of Digital Development is now discussing the possibility of obliging operators to share infrastructure along federal highways.

Yulia Tishina