Bouygues Telecom continues tower outsourcing mission with new JV

A new joint venture between Phoenix Tower International and Bouygues Telecom has been announced to develop approximately 4,000 new towers across France to its 5G prospects.

The deal will see the creation of a new company, controlled by Phoenix, will help Bouygues Telecom not only meet regulatory obligations for mobile coverage, but perhaps also accelerate a challenge to the market leaders in France.

“This agreement allows Bouygues Telecom to sustain its efforts in sites deployment in Less Dense Areas and also to meet the New Deal requirements,” said Jean Paul Arzel, Head of Network Division at Bouygues Telecom. “It will also contribute to considerably strengthen our Mobile network coverage in rural areas.”

Thanks to the deployment of 5G infrastructure, telcos are under financial strain to meet expectations and remain competitive, though regulatory obligations for 4G coverage in the rural environments are also placing stress on the spreadsheets.

In 2018, French regulator ARCEP announced new obligations for the spectrum licence-holders to improve mobile coverage across all regions in the country. Some of the obligations included forcing each operator deploying at least 5,000 new cell sites across the country, some of which will be shared infrastructure, as well as ubiquitous 4G coverage for the population and on transport networks.

As France is a large nation with very low population density in some regions, this could prove financially to be a difficult standard to meet, though joint ventures with tower companies is one way to achieve such objectives. It might mean that the telcos are ‘tenants’ on the infrastructure for the long-term, but it does levitate some of the financial pressures in the short-term.

Alongside this agreement with Phoenix, Bouygues Telecom announced a similar agreement with Cellnex, the Spanish tower company which is aggressively rolling out new infrastructure as well as purchasing assets from a variety of cash-strapped telcos.

As part of this agreement, Cellnex will contribute €1 billion to fund a 31,500km fibre optic network in France to provide mobile backhaul and fixed connectivity services. Bouygues Telecom will act as the anchor-tenant of the network, signing a signing a 30+5-year contract worth €4 billion, which will account for an estimated 80% of the joint ventures total revenues. Cellnex is free to offer services to other competitors, but Bouygues Telecom is the priority.

Although these agreements will benefit Bouygues Telecom in the short-term, it is handing over more control of its network to external parties. Bouygues Telecom still owns the active equipment, the 4G and 5G radios, though in not having complete ownership of its passive network, the towers and backhaul, it might have to compromise on some decision making.

For example, one proposed site might be excellent for Bouygues Telecom’s network needs, but as the tower companies will be thinking of other customers also, some compromises might have to be made. Bouygues Telecom will act as the anchor customer on these sites, so its demands will certainly be listened to, but as the tower companies have the controlling stakes in the joint ventures, Bouygues Telecom might not get its own way all the time.

This new set-up is of course a compromise, but it does have an eye on the bigger picture. A concession today might lead to greater profits tomorrow.