American Tower operates 178.8k towers in five distinct geographical regions. The company operates towers in the United States (40.6k), Europe (4.8k), and emerging markets including India (73.6k), Latin America (40.9k), Africa (18.8k).
There are a few notable distinctions which effect the timing of 5G roll-outs in developed markets like the United States and emerging markets such as India. These include the: i) technology cycle, ii) mobile handset purchases, and iii) digital infrastructure build-out.
At the same time that the United States is deploying 5G, India is deploying a robust nationwide 4G network to cover its 1.3 billion people. However, in emerging markets, the 3G to 4G and 4G to 5G transitions will inevitably happen faster when these countries make the upgrade. This is because these countries will start later in the technology cycle. As new technology is introduced, at the front-end of the cycle, it is expensive. Whereas at the back-end of the cycle, it gets less expensive. Therefore, the handsets and transmission equipment necessary to roll-out 5G will become cheaper the longer a country delays its roll-out. This phenomenon has happened historically in every cycle, from 2G to 3G and 3G to 4G.
Mobile Handset Purchases
Mobile handsets are another distinct phenomenon of emerging markets. Whereby a significant number of handsets that are used in emerging markets are actually recycled handsets from more developed markets. For example, 3G phones from the United States find their way to Africa and India for re-sale purposes.
Similarly, as more and more consumers start using 5G phones, their old 4G phones that they trade-in when buying a new 5G phone, will be refurbished, and sent to Africa and India, for sale in those geographies. As a result, the price point for mobile handsets in emerging markets can be much lower. This helps subscribers in those countries be able to afford the handsets and the services. American Tower points out that this phenomenon is yet another driver as to why developed markets will roll-out 5G first and emerging markets will follow later.
Digital Infrastructure Build-Out
American Tower acknowledges that most emerging market countries do not have a suitable wireline offering for consumers. Whether measured in terms of speed and performance, or even for the purposes of entertainment. For example, Internet delivery in India is 80% to 90% through mobile devices. Further, less than 10% of the population in India actually has a wireline connection. Whereas, in the United States, more than half of Internet delivery occurs over wired connections. This includes Wi-Fi, a computer connected via ethernet or a TV on the wall connected to the cloud.
This lack of digital infrastructure built-out in emerging markets has led American Tower to adjacent verticals of digital infrastructure, namely fiber. Fiber is particularly important in a 5G environment for backhaul purposes. However, emerging market countries generally do not have a large capital pool or industry commitment earmarked for fiber deployment. Thus, American Tower has engaged in building fiber-to-the-tower in many of its emerging markets including India, Latin America, and Africa. American Tower has made fiber investments in places where it needs fiber-to-the-tower.
Importantly, American Tower can also sell the excess capacity for the “last mile” connection on its fiber. American Tower sells fiber capacity on a wholesale basis to its telecom customers. These telecom customers are able to re-sell and manage the fiber on a retail basis, for sale to local homes and businesses.