BR Towers: Providing Infrastructure for Telecom Companies in Brazil

Mauricio Giusti gives an overview of the telecommunications sector in Brazil, focusing on the infrastructure segment. Mr Giusti also presents BR Towers, a company founded in 2012 by GP Investments and Bradesco Private Equity Fund, specialized in providing telecom tower sharing solutions in the country.

Interview with Mauricio Giusti, CEO of BR Towers

Mauricio Giusti

Can you give us your overview of the telecommunications infrastructure sector here in Brazil?

The Brazilian telecoms sector is very large indeed. This telecoms market is probably the fourth or fifth largest market in the world and it’s very competitive. It is divided into 4 big players. We are positioned in that market as an infrastructure player. We provide infrastructure for telecom companies; specifically we provide towers to help companies expand their networks and implement the equipment that they need.

Usually when a tower is built by a telecom operator, it is designed to host just one operator. When we build or buy a tower, we prepare it to receive between two to five different operators. This creates a lot of efficiency for the sector and reduces the complexity of implementing the infrastructure.


Can you tell us a bit about BR Towers?

This is a very young company, we started in October 2012, and so we have been operating for less than 2 years. Many things have happened since then.

BR Towers began with the acquisition of 2000 towers from Vivo in October 2012. The company was a start-up funded by GP Investments, a very large private equity fund in Brazil. In December, GIC, the sovereign fund from Singapore joined the company as a shareholder. By January, Bradesco Private Equity, a very large financial group in Brazil also joined as a shareholder. In February, we acquired a boutique tower company in Brazil called SiteSharing, which was specialised in building new towers for the operators. The founder of SiteSharing then became another shareholder in our company. GP Investments represents 60% of the shareholders, Bradesco represents 25% and the founder of SiteSharing represents the remaining 15%.

Another important milestone for this company was in May when we acquired another 2000 towers from Oi. By the end of this year, we should have about 5000 towers including the towers we have been building, after just 2 years of operations. This year we hope to build 600 towers. As you can see, we have been advancing a great deal in this short period since we first started up.

BR Towers

What is the company’s philosophy and what are the differentials that set you apart?

One key aspect is that we are a Brazilian company and so our decisions are greatly centralised in Brazil. This gives us a very fast approach on how to serve our clients. We are very flexible and customised in terms of how we design our solutions for our clients. I think that this is a key differential. I also think that we have a very good combination of experience in telecoms and experience in building towers. Many executives on our management come from telecom backgrounds and so we are joining that experience with the tower building business. SiteSharing for example, has the experience of building more than 1000 towers in Brazil, and so by joining that expertise with our telecoms knowledge, we have a very good perspective of how to understand our clients´ needs. I was an executive for Telefonica for ten years and so I understand the main challenges and difficulties that a telecoms company faces in Brazil. That knowledge is very important for us when it comes to dealing with clients because we can understand their point of view. I think that this has really given us a good advantage over our competitors in Brazil. The market here is very new; this is a sector that was created in Brazil just five years ago.

Could you tell us about some of your success cases?

I can give the example of a very large telecoms operator in Brazil, called Vivo, which faced the challenge of implementing 200 towers in a certain area of Brazil, in a very short period. Usually it takes about 6 to 12 months to build a telecoms tower. That company needed to implement 200 towers in less than three months. They approached us with the proposal, which we analysed and we believed it to be possible. Thus, we have taken on the project to help them build the 200 towers in one state of Brazil in this time frame. We are about to finalise the process and we are doing very well in terms of meeting all the deadlines. We were able to transform our procedures and implement a new way of doing business by having a team that builds towers working together with the telecoms company. Building a telecoms tower may sound simple but it is a very long process, you have to find the land, negotiate the agreement with the landowner, plan the project, buy the tower, assemble it, secure and install the energy supply, etc. Doing all of this is not easy, and we need to do it in less than 3 months, which is a Brazilian record for that operator.

What would you say are the main challenges that the sector faces today? What are the main challenges that your company faces?

I think that we have an opportunity here that at the same time is a challenge. There is a shortage of telecoms infrastructure here in Brazil. To give an example, in Brazil if you take the number of users and divide it by the number of towers, you will have a situation where for each tower you have around 5000 users. When you do the same thing for the USA, you will find around 800 to 1000 users to a tower. Brazil has around 60,000 towers but we probably need to have at least 150 to 200,000 towers here. That is a huge challenge; we are talking about growing by at least 100,000 towers. This will need around 30 billion reais or 10 billion euros of investment in infrastructure and that is only for the towers, not to mention the investment needed in the telecoms equipment itself.

Building towers and infrastructure in Brazil is not easy, it is a challenge; there are many issues regarding permits, licensing, etc. The process is very complex. At the same time, you have to have the capacity to implement these projects, i.e. you have to have tower manufacturers, field teams, construction teams, etc.

These are challenges but they are also huge opportunities for us. We have a good outlook for the coming years. Furthermore, many telecoms operators are changing in order to focus on other parts of the value chain, for example looking towards social media, applications, content, fibre, etc. Investing money, time and management in implementing steel towers is not something that is their focus right now. Most of the 60,000 towers that already exist in Brazil were built by telecoms companies, but the 100,000 that are going to be built in the future are most likely to be built by companies like BR Towers because the operators themselves are no longer focused on that part of the value chain.

The sector as a whole faces the important challenge of inefficiency. All of the margins have been reduced a lot by the competition. In the past, operators used to have a 50% margin, however, right now telecom operators are looking at margins of 25%.

Our value proposition is to bring more efficiency to the process. Usually when a tower is built by a telecom operator, it is designed to host just one operator. When we build or buy a tower, we prepare it to receive between two to five different operators. This creates a lot of efficiency for the sector and reduces the complexity of implementing the infrastructure. It is much easier to build one tower for five operators than to build five towers, one for each operator. This way you only have to have one licence instead of five.

The sector offers very good opportunities for investors, particularly in terms of infrastructure. We need to be prepared with the right financial and managerial capacity to fulfil the demands of the sector. We also need to be agile in order to make the most of these opportunities and to help the telecom operators to meet their targets.

What is the company’s growth strategy? Are you completely focused on Brazil?

Yes. Given that there are such huge opportunities here in Brazil and that our experience and knowledge is based on the Brazilian market, we have no plans to expand outside of Brazil in the near future.

One of our growth strategy is based on acquisitions. We have acquired two large portfolios of towers, one from Vivo and the other from Oi. We see the acquisition of towers as a potential lever for growth. We also see a lot of potential in the building of new towers, what we call “build to suit”. Usually we build a new tower for the anchored tenants, i.e. the ones that have asked to have the tower. We see a very bright future for this kind of proposition. We see it as a kind of greenfield growth. The two main levers for BR Tower´s growth therefore are acquisition, but more importantly, the building of new towers.

What is your vision for the future of the company in two or three years’ time? What would you like to achieve?

I believe that we need to work very closely with our clients. We have to not only provide infrastructure for our clients but also solutions. We are trying to help the operators identify where they have gaps in coverage. Usually the traditional approach of a tower company is just to offer infrastructure. However, we are trying to be more active and to create a better working relationship, more like a partnership. We try to present the telecoms operators with some analysis and studies of where they might have some gaps in infrastructure. To give you an example, we have a tower very close to the Itaquera Stadium, the stadium that is going to hold the first match of the World Cup. We presented to one of the telecom operators in Brazil with their coverage in that area to show them that they may have problems covering the Itaquera area, and we showed them that we have a tower very close by. Instead of waiting for the telecom companies to ask us for a tower, we are trying to offer them towers. We know that these towers are very important for these companies because they allow them to offer better quality, coverage, and service to their clients.

In two or three years, I would really like to see BR Towers as a partner for the telecom companies, where we help them to meet their challenges in terms of efficiency and quality of service. Right now in Brazil, efficiency and quality are key issues on the agenda for each telecom company.

In terms of the company itself, I would like to see that in two or three years’ time, the meritocracy culture that we are employing here in this company is solidly implemented. If I decided to go on vacation, move or retire, I would like to see that culture prevail in the company in the future.

What advice or message would you give to any foreign investor that is interested in investing in Brazil and in particular in this sector?

I think that Brazil offers huge opportunities but you need to be prepared to work in a very dynamic scenario where things change a lot. Doing business in Brazil is not easy; it is complex. We are familiar with the challenges since we depend a lot on things like licenses, permits and so on. This is part of doing business in Brazil. Getting a license for a tower in some other countries can be a matter of weeks but here in Brazil it is a matter of months. Therefore, on one hand, working in Brazil is very complex but on the other hand, there are such huge opportunities here. In our sector, we see very good opportunities in terms of growth perspective and adding value for our customers.

You need to come prepared. Someone once said that Brazil is not for amateurs but for professionals because of the complex business environment. That being said, the rewards can be huge.


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