ISLAMABAD: As 95 percent of Pakistan’s towers and related infrastructure is operator-owned, Fitch Solutions has long believed that the emergence of a well-funded and resourced specialist player would be the best way of accelerating investment in this under-resourced market.
According to Fitch Solutions, Engro, which only entered the telecoms infrastructure business in 2018, already has well-established relationships with all four of the country’s mobile network operators – Telenor, Zong, Jazz and Ufone – and had over 1,800 operational sites as of August 2021.
These are managed by a wholly-owned Engro subsidiary, Infiniti, through a unit called Engro Enfrashare. As part of the group’s new digital infrastructure strategy, Enfrashare has been spun-off from Infiniti (which is now tasked with investing in data collection and analytics projects) and we believe this will give Engro a greater range of options for the future, including partnering with other infrastructure companies or a listing on the local bourse, said Fitch Solutions.
As part of the revamp, Enfrashare is tasked with increasing its operational base to 5,000 towers by 2025. Specific details have not been disclosed, but we consider it likely that expansion will be achieved through the acquisition of strategically-useful assets, such as operators’ existing towers, fibre cables and data centres, as per the business models of most other towercos, according to Fitch Solutions.
Although it is one of the largest markets for consumer telecoms services in Asia, Pakistan is relatively digitally immature, largely owing to the limitations of its communications infrastructure. The country is phasing out its extensive 3G mobile networks, and customers are transferring to the relatively new 4G platforms, which are still being built out at considerable expense. In addition, 5G is expected to be introduced from 2023/24 and this will add more capital cost pressures for operators. Outsourcing critical passive infrastructure to a specialist will help operators cost-effectively manage their 4G/5G transitions without having to pile price increases onto end-users, said Fitch Solutions.
Enfraco is also tasked with exploring ‘other investment avenues within the connectivity value chain’, according to an official statement. We believe this refers to, albeit not exclusively, investment in fibre infrastructure, most likely for backhaul purposes but also potentially for use in metro fibre rings that could be opened up to other operators for local broadband connectivity purposes. While the investment could also be used to establish cloud or edge data centres, we believe the high costs of establishing cloud infrastructure would necessitate a listing of the business at some point.
The edotco claims to own 1,610 towers in Pakistan, many of which have been built for Jazz, Telenor and Zong. The infrastructure specialist has said it wants to double the size of its Asian towers portfolio by 2024 and to invest more in fibre, small cells and edge computing. It has not disclosed any specific plans for Pakistan, but it is clear that Enfraco will need to at least match its rival’s investments in the medium to long term, concluded Fitch Solutions. – TLTP