TORRESEC is the first towerco into Argentina

BTS contract may be first of many as Argentina needs 4-5,000 additional towers for 4G

Read this article to learn:

  • The drivers and scale of the tower build in Argentina
  • Infrastructure sharing to date in Argentina
  • Real estate costs in Argentina
  • Site acquisition and permitting challenges
  • TowerXchange estimates of the number of towers and SIMs per tower in Argentina

The hitherto untapped Argentinian tower market welcomes its first independent towerco in Innovattel / TORRESEC, which has secured their maiden build to suit contract in Argentina, and which is already hiring a full time staff in-country. Innovattel/Torresec is a build-to-suit (BTS) towerco with over 350 towers across Puerto Rico (Innovattel Properties), Ecuador (Torresec Ecuador), Peru (Torresec Peru), and Colombia (Torresec Colombia). TowerXchange caught up with COO Juan Cueria in an airport departure lounge for a snapshot interview to get some insight into TORRESEC’s launch in Argentina.

TowerXchange: Congratulations on TORRESEC becoming the first Towerco in Argentina! What has attracted you to invest in Argentina?

Juan Cueria, COO, Innovattel / TORRESEC:

Argentina has potential beyond precedent. The recent LTE licenses awarded to the three mayor players, the need for growth in numbers of sites and in the capacity in the country for each of the carriers exceed any other territory in LatAm (not including Brazil).

There is sufficient demand for the four operators to grow and compete in the country. DIRECTV is aggressively growing as well.

Our management has extensive experience in the country. Argentina has no shortage of professionals and a well trained labor force; the demand for services will continue to catch up with the rest of the world.

TowerXchange: Please tell us a bit about the Argentinian tower market – how big / how mature is the tower network? What is driving growth?

Juan Cueria, COO, Innovattel / TORRESEC:

I don’t have specifics on the number of sites, but you can imagine how large the territory is; with over 2.7mn km2, Argentina is the second largest country in LATAM, is virgin to the concept of tower leasing and BTS, yet familiar with co-location strategies among the operators. There is substantial demand for sites: both capacity and coverage, new technology deployments with 4G spectrum recently allocated, and big requirements for small cells.

TowerXchange: What can you tell us about the build to suit (BTS) contract you have secured?

Juan Cueria, COO, Innovattel / TORRESEC:

We have closed one and we are negotiating three more. The carriers welcome very much the concept of an independent tower company to facilitate infrastructure sharing and they are very positive about having an additional source to help in the deployment of sites. The BTS market will work like any other: they will give us search rings, we will build and own the sites.

We don’t see any appetite for Argentina’s carriers to sell their tower assets at the moment.

TowerXchange: What level of new tower building are you anticipating in the Argentinian market as a whole?

Juan Cueria, COO, Innovattel / TORRESEC:

From the conversations we’ve had, I foresee Argentina’s carriers needing 4-5,000 new sites in the next two to three years. Argentina has been in a holding pattern pending the award of 4G licenses at the beginning of the year, so deployment has only recently begun for the country’s fiercely competitive three main carriers. As well as new coverage obligations, there is also an urgent need for capacity – it’s hard to place a call in Buenos Aires – so Argentina’s carriers need to build and they need to build fast.

TowerXchange: Is there an existing culture of infrastructure sharing? For example have there been many bi-lateral swaps between carriers in Argentina?

Juan Cueria, COO, Innovattel / TORRESEC:

As in many other territories, Argentina’s carriers have swapped sites one by one, but large scale infrastructure sharing agreements between carriers have proved impossible to date.

Nextel has been doing a lot of co-location on their ~600 sites to generate income, so Argentina’s towers have been commercialised on a limited basis.

TowerXchange: How savvy are Argentina’s landlords to the value of real estate to carriers and towercos?

Juan Cueria, COO, Innovattel / TORRESEC:

Land is expensive so rent is expensive in Argentina. The majority of land owners request at least one year in advance rent, or some rent in U.S. dollars, so the price structure is higher than some countries in LatAm. Landlords in metropolitan areas are pretty slick and smart – they know the need for telecom sites, and negotiate tough deals. We’re often able to find better sites and negotiate better agreements in rural areas.

TowerXchange: How have you been able to get comfortable with country risk?

Juan Cueria, COO, Innovattel / TORRESEC:

The private sectors and the government agencies are cooperating well with new business and job creation opportunities. You still need to have a conservative approach, but so far we are very optimistic with the country and the opportunity.

TowerXchange: What is your impression of the regulatory environment, for example is there an established licensing regime for towercos and how is site permitting governed?

Juan Cueria, COO, Innovattel / TORRESEC:

This is the area that requires a lot of changes; the site acquisition and permitting process is very challenging. Like any other countries some municipalities’ restrictions apply and you need to be creative and work with them and with the process, you cannot force the entrance. But it can be a long process to acquire permits.

There is no real regulation applying to the tower industry, although the government is facilitating that now.

TowerXchange: What is your strategy for raising capital to invest in Argentinian towers?

Juan Cueria, COO, Innovattel / TORRESEC:

You may be surprise how many equity funds are interested in Argentina; everybody recognises that this is a sleeping market, ready to awaken. We see this as a long term opportunity therefore we are comfortable with our financial plan.

TowerXchange: How do you foresee the future of the tower market in Argentina?

Juan Cueria, COO, Innovattel / TORRESEC:

Argentina is a virgin territory for the concept of tower leasing. The demand growth can make this the second largest player in the LatAm territory. Overall we see this market becoming the largest focus in the LatAm tower industry in the next three years.

Recent spectrum allocations in Argentina

With licenses valid for 15 years, incumbent carrier Movistar received frequencies in the 703MHz-713MHz and 758MHz-768MHz bands; Telecom Personal received spectrum in the 713MHz-723MHz and 768MHz-778MHz bands; and Claro acquired spectrum in the 723MHz-738MHz and 778MHz-793MHz bands. New entrant Arlink (Grupo Uno) received 3G spectrum plus nationwide 4G concessions incorporating the 1745MHz-1755MHz, 2145MHz-2155MHz, 738MHz-748MHz and 793MHz-803MHz spectrum bands.

Within five years, recipients of 4G spectrum are obligated to provide coverage to all localities with a population greater than 500, representing around 98% population coverage.

TowerXchange estimates the size of the Argentinian tower market

While we haven’t yet studied the Argentinian tower market in detail, we have solicited estimated tower counts from several stakeholders, giving us a weighted mean suggesting there are ~13,700 towers in Argentina. This suggests Argentina has 4,577 SIMs per tower, comparable to Brazil at 5,625 but still distantly lagging the most mature tower market in the Americas, the U.S. with 1,220 SIMS per tower.

The country’s three leading MNOs (Claro, Personal and Movistar), head a well balanced competitive mobile market with 30%-35% market share each. Each MNO has a tower portfolio of around 4,000 sites. Nextel, subject to exit rumors, has 3% market share and ~600 towers.

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