London — The low-cost rural operator space has grown but given the size of the opportunity it has been mighty slow. This week Russell Southwood spoke to Michael Darcy, CEO and Founder of AMN about its expansion plans and its purchase of equipment vendor Range Networks.
The idea for setting up AMN came out of working for another company. Darcy took a job as CEO of K-Net in Ghana. The company had signed a universal agency contract before he had arrived for 10 rural GSM sites and part of the contract was to manage the sites.
"I wanted to see the stats for the sites. I imagined there would be 5 phone calls a day but the volume was really high. I went to one of the villages and got malaria in the process. It was from that I realized how precious this rural service was and that there were a lot of villages across Africa like these ones in Ghana. I resigned from K-Net in the summer of 2013 and spent the first month putting a business plan together. I convinced my wife that this was something we should do".
He contacted a couple of people including Jules Degila, who became a Board Member. The first challenge was to see whether it was possible to sell it to the MNOs in a world in which Huawei and Ericsson seem to have almost everything tied up
So the strategy they adopted was to say that AMN would do everything. It would fund and build the sites and deliver revenues into the MNO networks on the basis that they got a share of the revenues. With Degila, they set up meetings with 5 MNOs in Benin, including MTN.
The latter was the only appointment not with the CEO but instead was with the CTO. After five minutes of their presentation, the CTO said 'my CEO has to hear this'. The CEO listened and said 'we're going to do this but I need to seek permission from my bosses in the MTN Group'. They talked it through and thought it might take six months to sign. In the event, it was three years before AMN signed a contract with MTN.
Its first contract with an MNO was with the now-defunct Bell Benin, who Darcy describes jokingly as 'the weakest operator in Africa.' But weak or not, it now had its first contract with an MNO. It needed to build a pilot site and it had no money and no people but it got built and was only slightly less than a month behind schedule. While Bell Benin was still operating it got paid but it went bust later in 2014.
It took a tough decision only to sign up tier one operators. Its big breakthrough came when it responded to an RFP from Orange for Cameroon. There were 14 bids and it made it to a shortlist of 5. Two were finally selected to do pilot contracts and one would be promised a full contract at the end. Luck was with them as the second party had difficulties negotiating the pilot contract. It carried out 2 pilot sites within 3 months and Orange was happy with what they had done:"We now have 200 sites in Cameroon and Orange is pushing us for more."
Orange circulated what they had done in Cameroon and AMN got a call from Orange DRC. It already had 20 sites of this kind and signed a full contract late in 2015. It started with 200 sites but this has now doubled to 400 sites.
Its first MTN contract was not in Benin but Zambia. It was looking for a solution and signed for a pilot of 10 sites:"The whole MTN Group was watching. It went well and we signed a framework agreement in 2018. Eventually we signed 8-9 MTN opcos and it has kept us busy so we have not been proactive for new contracts."
It's total portfolio across 7 countries is 1,400 sites:"In reality we're an operator but we don't have a licence. The MNOs have the licence. We're now funded to about 2,000 sites, which will be completed by the end of 2020. The equipment is already in the warehouse." The next phase after that will be funded by a South African private equity group who will be putting in US$35 million:"It will take us to 5,000 sites over a two and a half year period."
The attraction for the MNOs is that they have long been interested in reaching rural areas but that there have been several failed rural products:"What we do is different. We're ruthless about CAPEX and OPEX." Officially Darcy says it needs a minimum of 1,000 people per base station but it's country specific and in some countries it can go as low as 600-700 people. In DRC we would not look at less than 3,000-4,000. ARPUs and subscriber penetration is much lower." The criteria used to select are simple: 1. Is it first to market? and 2. Are there enough people?
There is no constraint on where the BTS can be located as it has an integrated power source and uses VSAT connectivity:"50% of our OPEX is satellite costs." Intelsat started as one of its suppliers and is now one of its biggest investors.95% of its revenues come from voice calls but "we expect that situation to change."
The phase two countries will be driven by MNO demand but are likely to be Kenya, Mozambique, South Africa, Tanzania, Uganda, Madagascar and Liberia (where it already has a presence):"For this business to be interesting you need to go north of 100 sites in a country to cover the operating overheads."
This week AMN completed the purchase of US equipment vendor Range Networks: "When we were trying to get the CAPEX down, the products did not exist. Vendors thought we were crazy as it's not something you can sell to a wider market. We were first introduced to Range Networks, who came to try and sell us equipment. It was interesting and different. It didn't have the product we could use today. But we thought how can we adapt it for our needs? Does it make sense to merge the two entities?"
The first AMN production (12 metre monopole) sites based on the new Range-based RAN equipment are expected to be deployed from mid 2021. These sites will have a base configuration of 3TRX (2G) with HSPA (3G) in the 900MHz GSM band, upgradeable to 8TRX (2G) with HSPA (3G) and LTE (4G). The 20m self-supporting lattice towers will offer 9TRX plus 3x HSPA and LTE carriers in 3 sectors each for 2 co-located operators. Additional frequency bands will also be supported.
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