With tower outsourcing increasing, operators can minimize tower lease costs by reducing the size of their microwave antennas with higher system gain radios.
In Part 1 of this two-part blog series, we discussed how higher system gain could lower antenna related costs by enabling smaller antennas to be used while supporting the same capacity and availability. We showed the clear benefit of using smaller antennas, reducing CAPEX by 70% or more, as well as significant additional savings in shipping, handling, and installation costs.
Changes in the industry
However, a trend is on the rise around the world that will have significant implications for operator OPEX. The sale and subsequent leasing of tower assets by mobile operators has been going on for several years and is now gathering pace as operators seek to free up billions of dollars in capital to re-invest in their core business. Here are just a few prominent examples of the many deals on the table:
- Vodafone is spinning off Europe’s largest tower portfolio, comprising 58,000 towers across ten markets.
- Telefónica has agreed to sell its portfolio of close to 31,000 sites in Europe and Latin America to American Tower.
- In a recent interview, MTN Group CEO stated that they are now looking to sell and lease back part of its South African tower portfolio, comprising around 13,000 cell towers. MTN has already completed similar transactions in other countries, such as Ghana and Uganda.
- After spinning off its tower assets in Mexico in 2015, America Movil has now stated their intention to sell off towers in the other Latin American markets in which it operates later this year.
In fact, according to recent industry research, there are now 305 towercos who own 70% of the world’s 4.87 million towers and rooftops (source: TowerXchange), so if you have not started to lease your towers yet, you soon could be!
Previously, operators would own all their towers and assets. But once towers are sold off, those operators will now have to lease back space on those same sites for their shelters, cabinets, antennas, and even cable runs. What once was a capital asset now becomes a yearly recurring operational expense. And these tower lease costs can be high, with the result that operators will now need to seek ways to minimize these new charges.
How to reduce your tower lease costs
One way to reduce site lease costs is to reduce the real estate needed to accommodate equipment, such as replacing shelters with outdoor cabinets. Still, some of the most expensive real estate is on the tower itself, as space and loading on any tower is very limited. Microwave antennas can take up large amounts of space on any tower. The mobile antenna arrays are generally a fixed size, but microwave antennas can vary in diameter from less than a meter to up to 4 meters or more. As we showed in Part 1, doubling the size of the antenna (e.g.: 0.9m to 1.8m) can increase the weight and wind-loading on the tower by nearly 4x.
For this reason, vertical tower space is set at a premium. While tower lease costs can vary dramatically from country to country, operator to operator, towerco to towerco, a rough rule of thumb is that every vertical foot (0.3m) of space costs US$100 per month, per antenna. For the example above, the tower rental for a 1.8m (6ft) antenna is US$600 per month, equating to US$14,400 per link, per year. Multiply that by 100’s or 1000’s of links in your network, and you have a major OPEX line item.
With better system gain, you can significantly reduce this OPEX line item by enabling a smaller antenna to be used. As illustrated in the table below, an additional 6 dB of system gain lets you use a 0.6m antenna instead of one 1.2m in diameter. That smaller antenna reduces tower weight and wind loading by 75%. It’s also 75% cheaper to ship and 65% cheaper to purchase, but it also cuts the tower lease costs in half, saving $4,800 per link, per year. This one simple choice can result in significant savings across a typical network.
System Gain vs. Tower Lease Cost Analysis
Antenna characteristics and example tower lease costs, by size.
Tower lease charges are provided as an example for illustrative purposes only. Actual lease charges will vary.
Discover how to reduce your tower leasing costs and positively impact your total cost of ownership today. Contact us to learn more.