Case Study – Telco Greenfield Connections

Telco Greenfield Connections

Context:

• Accelerated’s client wanted to understand the most important value propositions for greenfield property developers in considering telecom infrastructure providers

Accelerated’s approach to the research:

• Interviews and analysis were conducted by a McKinsey alumnus, with deep expertise across telecoms and over 160 interview-based projects
  
• Over 3 weeks 14 interviews were conducted: 8 with carriers and 6 with developers

Synopsis:

• Market share for telecom infrastructure provision is 80% large carriers and 20% small carriers

• The two largest providers have similar pricing constructs, perceived low level of risk and provide similar benefits

• The smaller providers are motivated to sign on developers, especially large ones, so that they can prove their bona fides to future developers. As such, they are willing to be flexible, and offer attractive terms to developers (e.g. revenue sharing, discounting, clauses allowing developers to terminate the contract for risk minimisation)

• Build to rent is emerging as a very attractive segment for developers. In this model, they will own and rent out the building, which changes the focus from the short to the longer term. As such, they are interested in propositions that allow them to participate in potential future upside (e.g. revenue sharing). Smaller carriers are tapping into this by offering a very flexible contract that the developer can choose (from no upfront fees with low revenue sharing to a greater upfront investment with larger revenue sharing)

• Developers have different approaches to choosing telecom infrastructure providers, and can be broadly characterised as follows:
  • Those that always use large carriers due to:
    • a desire to minimise risk
    • being ‘large carrier’ ready
    • Having a network that is reliable over the long term (typically for developers with multi-year, multi-stage developments)
  • Those that use providers on a case-by-case basis for each development
  • Those that prioritise short term returns (e.g. smaller developments, or apartments) which minimise upfront investments
  • Those that prioritise long term returns (e.g., build to rent) that would like revenue sharing