Sanjiv Ahuja: Eaton's first goal is passive infrastructure sharing, but later he hopes it will be able to share active networks
Sanjiv Ahuja, former chairman of Orange, and a number of other senior figures from the world's telecoms industry, have set up a bold project to share infrastructure in emerging markets.
So far Eaton Telecom Infrastructure is keeping a low profile. But visit the rented office in London where Ahuja bases his operations and you're likely to bump into Terry Rhodes, the former founder and CTO of Celtel, the company subsequently taken over by Zain, conducting meetings in the corridor.
"We also have Alan Harper: he's president," says Ahuja. Harper spent more than a decade with Vodafone, finishing as group strategy director before leaving in 2007 to pursue other activities.
So far Eaton is still in the development phase, but Ahuja — who ended his role with Orange in 2008 — is keen to talk. It's one of several opportunities that he's now pursuing, but the others have to remain confidential for the moment.
Initially Eaton's goal is "passive infrastructure sharing", he says: "That's tower sharing, in emerging markets. And over time we will transition it to sharing active networks."
He lists a few other stars of the industry, including business development director Tea Tuominen, another ex-Celtel and Zain executive, where she headed mergers and acquisitions as well as greenfield licence bids.
"I have several other people who have emerging market experience — particularly with Celtel", in addition to those two. "I've known several of these people for a long time — we were all part of the industry." Another executive is Thomas Jenell, former director of operations at Celtel and an ex Ericsson executive, who is CTO.
They were all asking: "What is it that keeps the penetration rate low in these markets?"
Some countries — Uganda, for example — have high penetration rates, but others are still that are still low. "What are the barriers?" asks Ahuja. "One of the biggest is the cost of building the network. It's dropping but it's still very high. The cost per subscriber is still very high in terms of capital expense."
There are two significant costs, he adds: the radio network and the tower infrastructure. "Most of these countries still aren't doing infrastructure sharing, so we started to look at the regulations."
Reducing the cost increases the economic activity, he says, and that "increases the efficiency of the operators, and helps to lower tariffs, increasing penetration". And all that reduces energy use and is therefore better for the environment. "All of these benefits are there, but it's not happening. So let's be a catalyst in getting it done in emerging markets — where it's needed a lot more than it's needed in the developed markets."
And it's a good time for such initiatives. Operators in emerging markets are still largely on 2G technology, "but there's 3G to come, there's WiMax to come, there's LTE to come," he says.
So he has built a team of people "with experience, credibility and knowledge of building and operating networks, of forming relationships with the operators around the globe".
The company "is primarily funded by the founders", says Ahuja. "That's the right way to represent it."
Now Eaton Telecom is working on partnerships with operators. The idea is to take an existing base of infrastructure, "and grow that as our anchor customer grows with us, and bring new customers on to it".
Infrastructure sharing will increase penetration into the market "that wouldn't be happening otherwise" — but won't those anchor customers wonder why they should give away a competitive advantage, network coverage, to rivals?
"It's a valid question but I think today in most of these markets this isn't as big a competitive advantage as it used to be. And the economic savings they get in opex and capex is really significant, and that helps overcome those pressures."
Lastly, and more importantly, he adds: "If they don't do it, their competitors will do it anyway. It's time for them to step in, help them restructure their balance sheet and take an asset out which today is just being used by them," he says.
"And the thing that is really important: it is economically the right thing for them, helps increase the penetration of mobile communications in the country, increases the economic activity, and it is better for the environment, and better for energy usage." So there are "tremendous" social and environmental benefits, as well as economic operational benefits.
Where is Eaton hoping to start? "We are making offers and looking at assets throughout the African continent, from north Africa down to South Africa. There are several opportunities we're working on."
And he and his colleagues are also working on opportunities "in central Asia and south Asia, as well as eastern Europe", he says: "It's a broad footprint that we are addressing today."
What can Eaton offer to these operators? Certainly, Ahuja has put together a talented and well connected team, but what can they offer that an operator in, say, South Africa or Bangladesh or Kazakhstan couldn't do itself?
"Do you know, it's very, very hard for two or three companies that have been competitors for several years to suddenly start working together — and to be able to get the leadership to be instantly start thinking beyond the businesses that they helped to create." They need a third party, someone that is neutral and can help them all and ensure that decisions are taken fairly, properly and appropriately.
"Our global scale brings the economies that you just don't have in a country-by-country operation." So Eaton can "provide opex and capex optimisation that they wouldn't get — but we also help provide a truly neutral third party infrastructure".
The telecom towers, the passive network, are what Eaton wants to work on at first, including the power and the security, "but our very next step providing the active network, because today the radio technology is there", he says: "A single radio equipment can be shared across different frequencies, by different operators."
Eaton doesn't intend to own the spectrum, he says. The customers will have their own spectrum and will be able to use it.
Step two will be "a couple of years down the road when the regulators allow active network sharing so you will see the same radio equipment being shared by several operators", he says. "We want to be there to provide that."
He's not looking at the backhaul network. Maybe in the future, but "it's not our focus". Generally customers "like to own their own backhaul".
So who are the customers? "Our customers are large telecom operators in each of these countries," he says. Are? "We are in extensive negotiations, and close to consummating several opportunities at this stage." He's aiming for announcements "by the middle of this year".
Privately, he names some companies that the Eaton team is working with. "They're large, multi-country telecom operators," is all he will say for publication.
Is he competing with companies such as Ericsson and Nokia Siemens Networks which are looking to do managed services deals to run networks in many parts of the world? "I think they're our partners in this," says Ahuja. "Generally we don't see them as owning the infrastructure. We see them as potential managers of the infrastructure."
And he questions whether a vendor-independent network can be managed by a single vendor.
Eaton's offer to operators will "free up cash which is on their balance sheet by selling us their asset", he says. "The second thing is, we commit to providing them operational savings and capital savings, over the years."
Savings will be "substantive enough that we have interest today from several operators, almost a dozen operators that we are talking to today". There's be cash up front, and then savings in capex and opex.
"Today we're looking at more than half a dozen countries." Where first? Hard to say, but he's expecting somewhere in Africa or central Asia to be in the lead. By central Asia, he means countries such as Afghanistan, Kazakhstan and so on: places which are still off many operators' mobile maps.
Eaton is not looking for start-ups: "We want to work with existing networks," says Ahuja. "It's easier. We like to deal with the major operators and this gives us a substantive portfolio to begin with."
But he does want to be there for the development of coverage, by building new towers as penetration and demand increase. "Absolutely. That's intrinsically linked to this business," he says.
"On the surface this all appears a simple proposition, but in practice it is very complex," he says. Eaton will have "to understand the true inventory — what is designed, what is built, what is installed". Usually there are gaps between perception and reality.
Then Eaton will be there in between the operators and their own customers. "We will have to give hard service level agreements to our customers, and ensure we are part of their overall business process. If they need a new site, they will need it in a certain period of time to serve their customers, and we will have to get it there."
That will put Eaton right in the planning process and will have to be arbiter between competitors, "while keeping very thick Chinese walls, not sharing the information — that's why the role of a neutral third party becomes very important".
Sounds like a challenge for Ahuja and his colleagues — but he has an experienced team working with him and they almost certainly know what they're letting themselves in for. GTB