Market floors strategy and fixed pricing model for co-location under the traditional leaseback framework: an albatross to the growth of tower companies and rural network infrastructure expansion in Ghana

Alexander Osei-Owusu

Research output: Contribution to book/anthology/report/conference proceedingArticle in proceedingResearchpeer-review

Abstract

Towers make up a substantial proportion of capital investments for telecoms operators and, in emerging markets, most of their operating costs. Mobile operators are opting to share towers, renting them from other tower companies instead of making ongoing and a single financial investments in infrastructure. Until the end of 2014 all the four top network operators in Ghana had signed sale or leaseback agreement of their traditional base towers to a third party, thus, the tower companies. The agreement is a non-exclusive arrangement, enabling the tower companies to “co-locate” other operators on the same towers. The higher the co-location ratio the better for the towers companies (and their financiers), as this drives up revenues from the same base costs.
Traditional towers are often designed for a specific number of spaces or tenants’ and finding ways to get these “perishable” spaces filled up by network operators or tenants’ will reflect the effectiveness of a particular pricing regime applied.
This paper looks at the sustainability of tower companies in Ghana under the current pricing regime. Specifically the research analyses from commercial view point, whether the fixed pricing regime adopted by infrastructure operators may help drive the needed revenues and investments. The research will also investigate whether the adoption of the fixed pricing strategy is primed on a business sense rather than institutional arrangement or influences. The implication of the pricing regime on expansion of telecom services within rural settlements or communities is also investigated. Under the fixed pricing regime, there is a base fee and a monthly escalation fee based on the consumer price index (CPI) of Ghana. The strategy may not be so much predatory for bigger operators who have enough subscribers or customers, this is to say market competition in rural areas may drive in favor of a market monopoly. The research focused on rural communities because characteristically such areas have low customers and balancing cost and expected income always plays a sizeable rule investments decisions.
The analysis is based on two approaches, on one part is the institutional analysis. For the analysis of the revenue outlook of telecom towers, revenues generated through the fixed pricing regime in more than 1000 site locations are presented and analyzed. With respect to the institutional analysis, a broader institutional framework will also be applied taking its point of departure in the first three levels of the four layer institutional framework of Koppenjan and Groenewegen (2005). The formalization of this framework by Koppenjan and Groenewegen (2005) will be use in assessing the relationship and institutional arrangements between the traditional tower owners and the tower companies under the traditional leaseback framework or agreement.
In particular the framework will help in determining the loyalty of the tower companies to the traditional tower owners and how it affect services to other MNO’s, the independence of the tower companies and the kind of contracts, agreements and negotiations. The financial analysis of revenues from selected sites will provide an assessment of revenue situation vis a vis number of take-ups for both urban and rural location areas.
Original languageEnglish
Title of host publicationProceedings, 27th Regional European ITS Conference, Cambridge, UK
PublisherEconstor
Publication date2016
Publication statusPublished - 2016
Event27th European Regional Conference of the International Telecommunications Society -
Duration: 9 Sept 201611 Sept 2016

Conference

Conference27th European Regional Conference of the International Telecommunications Society
Period09/09/201611/09/2016

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