Why Telecom Towers are key in the 5G era
Main reason telecom towers are key in the era of 5G is that telecommunication companies are realizing it is cheaper to share and/or lend infrastructure than to start from scratch, and tower companies may offer the best deals.
Towercos are becoming increasingly relevant again, as the benefits of 5G networks require a raft of new infrastructure to operate. Not only does this mean than mobile network operators need to upgrade, but it also means that investors are keen to spot new opportunities, that can deliver quick returns in the world of 5G stocks.
Last year was supposed to be the year of massive 5G deployment. Instead, it became the year of the COVID-19 pandemic and deployment plans came to a halt as drastic as it was unexpected.
However, during the pandemic telecoms have become one of the most essential industries and will most likely remain so for the foreseeable future. It is a sector with a major impact on all other sectors thanks to its crucial role as an enabler.
In fact, despite the exceptional situation in 2020, many sectors have continued to grow. According to a study by IoT Analytics, for the first time there are more connections between IoT devices than between non-IoT devices. This growth would not have been possible without a robust infrastructure to ensure connectivity between so many devices.
Burdened by high levels of debt and the prospect of costly investments to roll out 5G networks, telecommunications companies are realising they have been sitting on assets for which investors are willing to pay dearly: their towers.
Following years of sluggish revenue growth, the industry has warmed up to the idea of sharing infrastructure to cut costs. Some of the largest operators in Europe, for instance, are now rethinking their approach to tower ownership, possibly paving the way for a wave of mergers and acquisitions in a market where dealmaking is already well under way.
Why Towers are key
Now, larger European operators are also starting to see the appeal of separating out their tower assets.
The latest moves show that the mind-set has been evolving, . “Some operators have understood that the better value creation opportunity does not come from an outright sale, but from carving out and developing the towers business,” an HSBC Telecoms analyst said.
Tower companies lease out space in their sites to wireless operators, usually under long-term contracts, which generate predictable revenue streams favoured by investors.
Of course, the motivation behind such moves has been debt reduction and the potential to exploit tower assets’ higher valuations.
Tower companies lease out space in their sites to wireless operators, usually under long-term contracts, which generate predictable revenue streams favoured by investors.
That’s why telecoms also have an opportunity like never before to monetize their assets and infrastructure.
The launch of 5G networks is set to further strengthen the case for tower outsourcing. With the arrival of 5G expected to trigger a surge in data usage, operators will need more infrastructure. Tower companies are seen by many as the best placed to deploy it in a cost-efficient manner, meaning there could be many more deals to come.
As the construction of 5G networks continues at a rapid pace, the importance of telecom towers is growing, a fact reflected by operator moves to monetize their assets and by rising investments from third parties.
The brave new world won’t be possible without tower companies.
Post time: Dec-30-2021
