"We have expanded the business threefold in two years and keep on growing at a daring speed"
Russian Towers, the leader of the Russian telecommunications infrastructure market, once started their business as an infrastructure construction company. “Now it’s a technology company with its own service model whose revenue is averagely growing by more than 60% annually and the number of facilities – by 40-50%”, says Aleksandr Chub, Russian Towers President.
— When you were setting up this company, it was in fact about creating an entirely new business model in Russia: investing in a telecommunications infrastructure for its subsequent shared lease by mobile operators. Going niche is always a risk. Has it paid off?
— Nine years ago, when Russian Towers was established there was no such a business in our country.
In the first years, it actually was an infrastructure construction company. We constructed 50-, 70 meters high telecom towers, leased them out to several operators simultaneously, honed our competencies in high-quality construction works, maintenance, and customer relationship management. As soon as the team proved to be highly efficient, we took our next step launching a new product line – dual-purpose poles. Those projects made it possible for us to significantly expand urban communication facilities, which complies with the development strategies of our clients. Now we offer facilities to mobile operators which are built in 4 weeks instead of 8 months, and not 100 per year, but up to 200 per month. Now there are thousands of sites in cities which make the major part of our infrastructure – “Lightning”, “Power supplies”, “Urban transport”, “Buildings”, “Roofs”.
This year we extended the range of our infrastructure solutions by launching DAS projects. DAS, or distributed antenna system, allows us to fully equip large buildings, such as shopping and business centres, railway stations, hospitals, airports, stadiums and others, with telecom infrastructure. This system ensures simultaneous operation of all modern communication standards from all providers. These projects make it possible to provide high-quality coverage inside buildings in a short space of time, facilitate maintenance of the systems, and reduce operators’ costs for network connection.
As a result, the business is growing very rapidly. We had 900 tenants in 2013, now their number amounts to more than 5,000. Over the previous three years, the business has been annually growing, on average, by 60% in revenue and by 40-50% in the number of facilities. So, even if there was a risk at the beginning, it has definitely paid off.
— At first mobile operators were, to say the least, quite sceptical about such a business model. What is your cooperation like now?
— When we started, we were “one of subcontractors” for mobile operators. Now they consider us their business partner. Our formula for success lies in creating and developing a professional team, cultivating innovation culture in the company, clear understanding of mobile operators’ needs and market trends, as well as efficient management. By the way, Russian Towers is just one hundred people. And I am very proud that this year the “Top Thousand Russian Managers” ranking by Kommersant Publishing House and the Association of Managers included five members of our team.
— Two years ago you announced a new business strategy. What’s your assessment of its preliminary results?
— That’s right, in 2015 Russian Towers introduced a new strategy to the market. Actually, we radically changed the perception of the telecom infrastructure business core – from turnkey construction to a technology company with its own service model. Its success consists in continuously bringing new advanced solutions and services to the market.
As you know, every product or service has a life cycle: introduction, growth to maturity and decline. With this understanding, a company which is looking forward to long-term development has to continuously progress, search for ideas, develop and implement new products, solutions and business models.
— What objectives have shareholders set for you within the framework of the new strategy?
— They have defined them very clearly. The company should develop following a certain algorithm, exhibit sustainable and predictable growth, without sharp boosts and slowdowns.
Coming back to our strategy, it is based on three factors: scale of coverage, range of solutions, and services. Its implementation implies constant work in eight main directions: relationship with our key customers – mobile operators, access to standard basic infrastructure, opportunities for quick and high-quality construction and maintenance of the facilities, marketing and new services, professional team, efficient financial management, thoroughly elaborated legal framework and innovative IT-platform.
Russian Towers has designed the so called dual-purpose masts: light and electricity poles, contact-line structures for urban transport. We realized that we can improve them for placement of telecommunications equipment. Notably, it has turned out to be fruitful not just for our company, but for the whole telecom industry as it provided an impetus for active deployment of LTE technologies in Moscow with its largest subscriber base in the country. The fourth generation requires more base stations than 3G. However, the dense urban environment makes it impossible to build dozens of new full-size poles. Our solution allows us to use the existing city infrastructure and yield financial profits for municipal budgets. It is also profitable for mobile operators. We install equipment of two to three providers at each site and they apparently share expenses, cutting workforce costs. They can reduce costs up to threefold by outsourcing telecom infrastructure maintenance to experts.
— How has the new strategy manifested itself in the business of the company?
— In 2015 we started implementing a new, more innovative business approach. Of course, it required some shifts, including those in mindset. Building customised facilities is one thing and providing services in accordance with SLA – service level agreement – as well as establishing relations with clients is quite another. We rapidly expand our solutions and services portfolio. That’s why developing and introducing an advanced IT platform is one of our top priorities.
Today Russian Towers is the leader in the market, the only independent infrastructure operator in the country whose portfolio includes seven types of infrastructure which is ready for 5G technology and covers 55 Russian regions.
— Unlike other highly developed markets, in Russia most of the facilities belong to mobile operators. As estimated by AC&M, the Big Four alone owns 53.7 thousand towers, masts and poles. According to analysts’ forecasts, the Russian market may not witness major deals after the mode of the USA and Europe, where operators sell off their tower infrastructure, at all. How could this affect Russian Towers’ business activities?
— Selling tower infrastructures by operators remains an open issue and we are still interested in expanding our portfolio by means of these facilities. But I want to stress that over time, in two or three years already, this interest will start to go down. The point is that most of operators’ portfolios, which include primarily out-of-town facilities, are oriented towards deployment of older standard networks. According to analysts, in the short term the demand for base stations will rise by five to ten times, and mostly in cities and along traffic arteries. The interest in having towers outside cities will decline with the increase in demand for urban facilities. And the attractiveness of mobile operators’ large tower portfolios may become commensurate with infrastructure operators’ modest portfolios of urban facilities. As for us, we are determined to keep on expanding our own facilities portfolio. Today we are leaders in the market and are not going to lose ground.
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