- 17 hours ago
Telcos run the networks, but infrastructure companies are building the backbone. EdgePoint Towers Malaysia CEO Muniff Kamaruddin speaks with Cynthia Ng about tower economics, the reality behind the 5G promise, and why the future of connectivity may move beyond towers.
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00:10Hello, you are tuned in to Awani Review. My name is Cynthia Ng.
00:13When we talk about the 5G revolution, the focus is usually on speed and smartphones.
00:19But the real multi-billion dollar story is the infrastructure we don't see,
00:25which are the steel, the towers and the site powering the network.
00:30Joining me on the show today is Muneef Kamaruddin. He is the CEO of H-Point Towers in Malaysia.
00:37Now H-Point across Southeast Asia. In three countries, they operate about 16,000 sites in Malaysia, Indonesia and the
00:44Philippines.
00:45Great to have you here on the show Muneef and thank you for hosting us.
00:48Thank you so much. Pleasure to be here.
00:50Now Muneef, let's clear the air a bit first because when people talk about H-Point,
00:54I think they often mistake H-Point as a telco, but you are actually very different.
00:59You are in an infrastructure play. Could you walk us through how the economics of your business,
01:05how does it differ from the traditional telco provider?
01:08Okay, I think we are in the telecommunications ecosystem.
01:13We are in the B2B space and we basically serve the mobile network operators.
01:21Over a period of time in the three countries that we operate in, the operators are no longer building or
01:27minimizing their own builds.
01:29And they are counting on third parties to basically undertake the build process.
01:35So we are into the build and leasing business for telecommunication structures, mainly what you see by the roads are
01:42the towers and the lamp poles and the building system and so on and so forth.
01:46So we are part of the ecosystem and we are not dealing so much directly with the consumers but servicing
01:54the mobile network.
01:55So essentially the landlord for these telco providers.
01:58Landlord and the guys who are responsible to maintain, you know, be compliant to the regulations of the respective areas
02:06that we're building.
02:07So Modave, to take your point earlier, we are seeing a trend where telcos are selling off their towers, largely
02:15because they are quite expensive to maintain.
02:17So can you walk us through what is the business case for each point to double down on this business
02:23when towers are becoming quite expensive and difficult to build and to maintain?
02:28Well, I think what we offer to the mobile network operators, the fact that we can execute it a lot
02:38better, speed is of essence, understanding the bylaws, getting or requisiting the permits, acquiring the real estate or leasing the
02:51real estate for us to build the structures,
02:53become more of an art of executing, right?
02:59So which allows the network operators to basically focus on them managing the subscribers.
03:07So that's where we come in and value add into the whole space.
03:11And for Hpoint, what we have done over the past couple of years is that we have both a dual
03:18play of building out new sites as well as acquiring certain assets.
03:23from the market.
03:24Hpoint is an independent player. You are not tied to any single carrier. But in a very competitive market, why
03:33would a mobile network operator choose Hpoint?
03:36Number one is the speed. In order for us to be differentiating ourselves with the other parties who offer similar
03:47kind of businesses and services,
03:49the execution and the ability to execute fast is very, very important.
03:55Secondly is in terms of the professionals who actually run the business. So we are being staffed by team members
04:04who have very long established reputation of running the tower business in this part of the world.
04:12So there is that operational and expertise stickiness that hits your clients to you.
04:18However, I do need to ask you about prices because at the end of the day it's about returns and
04:23margins.
04:24Is tower or rather the infrastructure tower business, is it about who can provide the lowest rent to these MNOs?
04:33Well, it's a yes and no. I think the price needs to be placed at the appropriate levels. Otherwise I
04:39think the operators, the mobile network operators will not be able to get the right kind of returns as well.
04:45But the running of the infrastructure requires cash to run it. So if you were to give to companies who
04:57are not endowed with a lot of good cash flows,
05:01I think they may not necessarily be able to manage the infrastructure properly. You know, they may skip certain frequencies
05:09or maintaining the size, not pay the ground rental.
05:12So that will not happen to a company such as Hpoint because we will ensure that it's properly managed and
05:20run.
05:21All right. Let's talk about the math because your business thrives on high tenants. So more tenants per tower, the
05:29better for you.
05:30But we are seeing this trend in Southeast Asia where we are seeing consolidation among telco providers.
05:38In Malaysia, we have of course Selcom and DG, Indonesia, Indocet and CK Hutchinson.
05:44Looking at where we're heading, as your pool of customers shrink, does it make it harder for your path to
05:53profitability and how does that affect the tower co-business?
05:56I think that our worldview on that is consolidation. We view it in a more favorable light in the sense
06:04that it does make our customers who are the mobile network operator in terms of their business model more sustainable.
06:13So with sustainability, it will mean that a bit more consistency or less volatile market dynamics.
06:23It may hurt over the short term, but over a period of longer term, you will lead to a very
06:29much more competitive organization when they do much.
06:33And also over a longer term period, the consolidated companies will have to also roll out sites as well, because
06:42they do have growing population to meet the data growth.
06:46So that will eventually come into play. So we do view it in a favorable light, but you just need
06:54to go through a bit of pain at the start.
06:57Okay. So where are you now at that stage? If you could describe the ecosystem?
07:01Well, most probably in Indonesia, we've gone through one major consolidation with Indostar and Hutch.
07:09Right now we're going through another one with Excel and Smartfriend. And in Malaysia, we're going through with Cellcom and
07:18DG.
07:19So, so far, I think it's been pretty sustainable for us. And we try to basically give the right kind
07:28of offerings out to the mobile network operators.
07:30Okay. So on that note, we are also seeing Hpoint moving beyond the traditional tower business.
07:37You are now putting connectivity in retail outlets like MyNews and CU convenience stores.
07:43Yes.
07:43Is this a long term play to increase that revenue stream outside of the telco world?
07:52Or is this in some ways just to hedge your bets while this upheaval is happening in the telco industry?
07:57Well, I think you look at Malaysia, I wouldn't say that it's approaching, it's a matured market.
08:07So with that, we need to basically be quite innovative and creative in terms of our solutions.
08:13So why have we put out small cells basically? As the network becomes carrying more data, you basically need to
08:24infill it with a more dense network.
08:27And we need to find areas in which we can deploy these small cell solutions.
08:32So hence, that's why we chose people like a convenience store for us to deploy the small cell solutions.
08:42In building, I guess that's where the, particularly where the traffic footfalls go through, like particularly in the malls, transportation
08:50hubs, those are the areas that we choose to target to deploy in building solutions.
08:57And of late, there's also a bit more focus in terms of office buildings as well.
09:05Because generally, when you look at 5G, you can have quite wide coverage outdoor.
09:11But the minute you're going to indoors, I think that's where the coverage is a little bit lacking.
09:16Is this why we experience dead zones? Because there is the lack of connectivity within?
09:20It's a combination, yes. And at the same time, there's also a case of lack of capacity.
09:26So you may got, you may receive certain signals, but may not be enough to enjoy the right kind of
09:33user experience.
09:34Okay. So well, in building part of that business, how significant is this for EdgePoint moving forward?
09:43Well, I think Indonesia in building is one of the largest, it is the largest, in fact, in Indonesia with
09:51a building portfolio.
09:53In Malaysia, we've just started out. In fact, we've started from scratch, to be honest.
09:59And lastly, there was a big growth for us in Malaysia, largely coming out from the 5G deployment.
10:07Okay. Now, I want to talk about 5G. That's a very crucial part of this conversation.
10:11But speaking of in-building, I think EdgePoint also made quite significant inroads into private networks.
10:17You are seeing your service in buildings like TRX Exchange, Sunway Pyramid.
10:23These are massive bins for EdgePoint. Typically, you'd see that developers hand that part of that work to telco providers.
10:31But now, they're increasingly going to a third party like EdgePoint. What is the value proposition?
10:36If the operators were to do it themselves, then it will be a case whereby they're only building for one
10:41particular operator.
10:43Right? So what EdgePoint does is that when we build out, just like any towers, in buildings the same,
10:49we try to make sure that the infrastructure is open and to be shared by the various mobile network operators
10:56around. Right?
10:57So with that, it will create, in fact, a better offering to the mobile network operators.
11:04And for the subscribers, you'll get whoever their preferred network provider is to be on board.
11:12But does that mean that eventually, EdgePoint will start to be a direct competitor to telco providers?
11:19I would say for now, that's not what we're looking at.
11:21Okay. All right. Okay. So yeah, speaking about 5G, we keep hearing that 5G is about to change everything.
11:28But if you look at the rollout across Southeast Asia and even Malaysia, it has been quite uneven.
11:34From where you sit on the ground working as landlords to these telco providers,
11:39are they actually spending capital to really upgrade the service?
11:42Or are they still waiting for the economics to catch up?
11:46Well, that's a very good question. I think in the three countries we operate in,
11:50and it depends on the maturity. So I think in Philippines and Indonesia, there's still a lot of room for
11:59growth.
12:00And in Malaysia, I think the focus is being less on coverage, right?
12:06Be a bit more in terms of quality. So in terms of the user experience,
12:11in terms of making sure that there's enough capacity in selected areas to basically soak up the big data traffic
12:19that's coming out.
12:21So there needs to be an infill site that's been built in Malaysia.
12:24So as you can see, the build-outs are no longer the red, the tall red and whites.
12:30The towers or the tall structures are now becoming more of a street level fittings.
12:36You see lamps building out streetlights and in-building systems, small cells.
12:42So that's where the infrastructure is heading in Malaysia.
12:46And how does that affect your business?
12:48Does it mean like the big tower model is going to be something of a relic in the near future?
12:53No, I think it's still needed for rural coverage.
12:58But for us, where we build a lot more in urban and sub-urban, it will become a lot shorter,
13:07ranges from 24 meters to 30 meters structures.
13:12Malaysia's 5G network rollout has been quite a roller coaster.
13:17As an independent provider looking at all this happening, right, does the policy shift that we've been seeing about 5G
13:24rollout,
13:25does that create more demand for your business or does it just freeze the market
13:30because people are just unable to know where to invest in the next 5 to 10 years?
13:35Yeah, I think we have gone through waves over the past 4 or 5 years on that front.
13:42I think when the first single wholesale network was introduced, we went through a very big wave of demands,
13:51rolling out 5G infrastructure, helping out to deploy 5G infrastructure.
13:59So it has created a lot of good businesses to people like Hpoint and our competitors.
14:10And last year, I think it was introduced the second 5G network.
14:16Their focus is maybe a bit different from the single wholesale network.
14:22But there's still a lot of spillover from benefit rolling out sites for the second 5G network.
14:30For us mainly is in the IBC play.
14:34The in-building?
14:35Yeah.
14:36Okay.
14:37Currently, Hpoint operates about 16,000 sites across?
14:42Three countries.
14:43Three countries.
14:43Malaysia, Indonesia and the Philippines.
14:45I believe the target is in a couple of years is 20,000.
14:49Yeah.
14:49Where are you going to get that 4,000 from?
14:52Well, I think the respective countries will deliver their respective number, including Malaysia.
15:00So for Malaysia, I can speak on behalf of Malaysia, the way forward is going to be focused more on
15:085G and also 4G network densification.
15:14I think it will still be a core business of building the towers.
15:20But more and more, I think we will grow our in-building portfolio.
15:26Right?
15:27By the time we, you know, finish off the next few years, I think we will have one of a
15:32fairly large base of in-building sites.
15:35And, you know, we can count on iconic buildings.
15:39So we did recently, we did Sunway Square, which is a very massive building for us.
15:45It has over 900 antennas.
15:48We did TRX, we've turned Sunway Pyramid into 5G, right?
15:59So we want to grow those kind of new areas.
16:03We hope small cells will take off.
16:06You know, once you have the high-level overarching coverage areas all done up, then it will be very spotted
16:13areas for capacity relief.
16:15You know, places like, let's say, Mon Chiara, where people frequent often the frescoes and whatever else.
16:26And maybe let's see where private network will go, right?
16:29So I want to talk a bit about sustainability aspect of, or the energy aspect of towers.
16:35Because towers, they consume a lot of energy.
16:37I think Hpoint has spoken about greening the portfolio and making it more environmentally friendly.
16:48Is this, at this point, more of a CSR exercise for the company?
16:53Or is there a genuine business case in terms of ROI and margin for rolling out greener towers or sites?
17:03I think the outcome of the business case may vary from site to site because the solution will be dependent
17:14on the exact location where it is at.
17:18But as far as Hpoint is concerned, this is something that we believe in.
17:22We have about 30 locations across the three countries, whereby we have Solarize.
17:30I'm sure I call it Solarize with a solar hybrid.
17:34Mainly in Philippines because they do a tower plus power market.
17:40For Malaysia, we have one site that we have commercialized.
17:44So it's no longer a proof of concept. We actually have it.
17:47We have actually monetized it. It's actually along the Max Highway.
17:52One of the customers, mobile network operator, they were actually running on Genset.
17:58So we have converted that Genset into a Solar hybrid.
18:04And I'm proud to say that we have reduced close to 80% the carbon footprint for that particular product.
18:1080%?
18:1180%
18:11Okay.
18:12We want to do more obviously, but the challenge in Malaysia is that the great connectivity is quite good.
18:19Right?
18:20So, but whenever there are opportunities, we will try to do it.
18:25Okay.
18:25So besides in buildings and all that part that you've just mentioned, any other areas of good that you're looking
18:31at, particularly for Malaysia?
18:34I think these are the main focus areas, also trying to get into the energy.
18:42Solar powered or it's an adjacent business for us.
18:48Working on private networks for facilities could be also, will be also another areas that we want to work with.
18:57Maybe again with the mobile network operators, because we don't have spectrum, right?
19:02So you need to work with parties who do have spectrum.
19:05Now, speaking of the private network, I think that's quite a big, that's quite big in your Philippines business.
19:10Because I think you're in mines, industrial power networks.
19:15We aren't seeing that sort of 5G explosion yet in Malaysia, for instance, our ports, our energy systems.
19:21Is there a lack of industrial appetite here?
19:25Or what's holding us back?
19:26Is it regulatory, industrial appetite, cost?
19:29What is it?
19:30I think it's the, I think adoption from the consumer front has been quite commendable.
19:39Look, Malaysia 5G, when it comes to coverage, population area is roughly about 83%.
19:47One of the fastest 5G growing countries in the world.
19:51Now the question is, how do you want to push it further to beyond what it is right now?
19:58That's on the consumer front.
20:01I think on the enterprise front, I think trying to find out in terms of getting the best use cases,
20:09right?
20:09Be it whether medical services, manufacturing, I think it's a case of trying to get the industries to come on
20:20board.
20:21The right kind of use cases, the right kind of pricing levels.
20:27The infrastructure is a lot easier to be deployed.
20:31It's never a big concern.
20:34And which industries do you think are ripe for a rollout, like a big rollout?
20:40Anything that's got to do with logistics, ports. Apart from ports, it could be medical, services, hospitality and manufacturing.
20:52This will be the key areas.
20:53So what exactly is stopping industries? Is it because service or network is still patchy at this point?
21:01Or is it just there's no business case to having that yet?
21:05I think it's affordability, right?
21:09So manufacturing, rather than trying to fibreise the whole factory, they just need to swing those investment to mobility kind
21:19of a solution.
21:23And trying to write to find the right kind of pricing levels.
21:27And people who are in these areas, they want to see some kind of benefits coming back to them.
21:33So where is it going to come from?
21:35Largely coming from productivity, workforce, resource management, easier way of managing the operations, operational excellence, right?
21:45So I think that's where the returns would come from.
21:47Have you noticed any of this sort of returns?
21:50Have you seen in other markets like Indonesia and Philippines where you have your business?
21:54Well, Indonesia have done quite a fair bit on the selected industries, mainly mining.
22:01So there's been some proven cases.
22:04And I think in Malaysia, they are looking at mainly on the logistics front, ports, and maybe some parts of
22:12oil and gas.
22:15So I think it needs to get to scale at some point in time and hopefully it will come sooner
22:19rather than later.
22:20Does that mean that we need to have a stable 5G rollout before that for that to happen?
22:25Yes, I mean a more deeper kind of network to provide those kind of needed capacity in those areas.
22:37Now on the consumer front, for a person maybe watching this episode with poor signal.
22:43If you have the tower and you have the teleco, why are connections still dropping?
22:50What's missing here?
22:54It depends on the location that you are at.
22:57To be honest with you, my experience of network quality in Malaysia compared to countries that we have travelled,
23:05it is really not so bad.
23:08But there are pockets and then there are areas in which maybe the coverage could be or the quality could
23:16be a lot better.
23:18I can guarantee you there are certain blocks in this area in Carol Eco City that's really no indoor coverage.
23:24Why? Because there's no indoor solution.
23:27But we do have it in this building because we are one of the main tenants here.
23:32So I think it's a question of location where you are at and it's a question of people wanting to
23:43address those kind of coverage or quality related issues.
23:49Some areas, the coverage is there but because the capacity is lacking, you don't get those kind of right kind
23:59of user experience.
24:01So what does it mean?
24:03For the mobile network operator, it means that they have to invest a bit more money to provide the right
24:08kind of capacity
24:10or the capacity has maxed out is to build new infrastructure.
24:14Each point is quite unique because you are backed by private equity.
24:17You have very strong backers, Digital Bridge and the Abu Dhabi Investment Authority.
24:22Now we know that private capital is not forever capital.
24:25They are looking to exit in a couple of years.
24:27But you are in a business that requires planning 10, 20 years ahead.
24:32How do you manage that long term vision building for the country versus exits and return on investment?
24:44I think as a business concern, it will obviously be business as usual.
24:50I think at shareholding level, it may change.
24:54But as a business, we have to make sure that the company or age point continues to grow.
25:05And in order for us to ensure that, you know, we have to keep to the stitchings, right?
25:14Making sure that you are close to the customers, try to solve their problem as much as we humanly can.
25:24As well as looking at new areas, opportunities that may come up to do the agency business as well.
25:33So I think trying to get the company to grow, it will be the focus.
25:39Regardless of who that, who's around as the shareholders.
25:43Now everyone in the C-suite, they're talking about AI, AI deployment, AI in their business.
25:50For a tower company, what does that actually look like having AI in your business?
25:55Okay, that's another good question.
25:57On AI, we have invested in AI planning tool, which provides us with insights of how the network performs.
26:08So it's not as good as the mobile network operator platforms they have.
26:14But it does provide us with the necessary information and for us to have very good dialogues with the mobile
26:22network operators.
26:23Otherwise, we'll just...
26:24So is it just like having sensors on the steel or can technology, maybe even now, self-predict that,
26:31hey, you know, something's about to break down, we can go in and fix it before it happens?
26:35A bit of both.
26:39We...
26:41In Philippines, for example, they deployed remote monitoring systems and all the data basically gets pulled up to the cloud.
26:49You can do a lot of very deep analytics around that.
26:56For Malaysia, in fact, for all the three countries, we have deployed smart Bluetooth backlogs.
27:03What it does is basically, you know, it eliminates the need for people to go out to a certain area,
27:11collect the keys, drive back to the site.
27:14You know, so you can basically have access to the sites quite quickly.
27:19And above all, you are able to know directly who accesses the site at what time and whether they have
27:24permission to access the site or otherwise.
27:27On the platform tool, why is AI generated but it's basically crowdsourcing platform.
27:35So your phone basically gives all kinds of information back in terms of how the network is performing.
27:43So that information is basically put together via this platform and we are able to analyse the performance of the
27:50network.
27:50Where are the pockets of area that looks to be most exciting to you at this point?
27:55It's not a cookie cutter.
27:57I can't do the issues relating to a site in Penang.
28:02It could be different from building a site in Maran Pahang, right?
28:06So in Ganga, Perles or wherever that may be.
28:11So that is kind of interesting.
28:14But from a technology point of view, it will be interesting in terms of 5G deployment.
28:22Where is it going to be at?
28:24What kind of use cases will the use or in this case the mobile network operators deploy?
28:32You know, while we build the infra, we need to size to make sure that the infrastructure will be able
28:37to support the kind of use cases.
28:39Right? Some are deep, some are just very good enough kind of a coverage.
28:46So that kind of things would excite the organisation or Hpoint.
28:54And new technologies coming up and see how we can play in those technologies, right?
29:00It's shifting every few years.
29:04All right.
29:05Well, thank you so much, Munif, for sharing your insights and best of luck to you and Hpoint.
29:11All right. Thank you so much, Cynthia. Thank you for your time.
29:12All right.
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