The tower and small cell market in the Asia Pacific experienced notable growth in 2021, with S&P Global estimating an increase of 5.1% to a total of 5.79 million sites, up from 5.51 million in 2020. This growth, driven by the gradual easing of pandemic restrictions and the rollout of vaccines, marked a significant recovery after a slowdown in 2020. However, the industry now faces a complex landscape of rising costs, regulatory challenges, and shifting market dynamics.
The COVID-19 pandemic had a profound impact on the tower industry, particularly in mainland China, where lockdowns in 2021 and 2022 led to stalled construction and disrupted capital expenditures. Despite these setbacks, the overall market showed resilience. The increase in towers and small cells in 2021 reflects the sector's recovery and the growing demand for network infrastructure driven by the expansion of 5G services.
In the Asia Pacific, traditional macro-cell towers still dominate, reportedly accounting for 61.5% of the total, but the proportion of small cells and Distributed Antenna Systems (DAS) has risen to 37.8%. This shift highlights the industry’s adaptability to new technological demands, particularly in dense urban areas and indoor spaces.
Regional Breakdown and Emerging Trends
Greater China remains the largest market, with 2.1 million towers, followed by South Korea, Japan, India, and Indonesia. Despite the challenges faced by mainland China, including the impact of lockdowns and supply chain disruptions, the region is expected to maintain a steady growth rate. The emphasis is increasingly on small cells and DAS, with a projected compound annual growth rate (CAGR) of 18.9% for these technologies from 2022 to 2032. This shift is crucial as it supports better coverage in urban environments and complements the overall network expansion.
The rest of East Asia saw significant growth in 2021, particularly in Japan, which experienced a 19.7% increase in tower construction due to aggressive 5G deployment. South Korea also contributed to the region's growth, though it faces ongoing challenges related to high operational costs. The growth in this subregion is expected to continue at a 2.2% CAGR, driven by traditional towers and an ongoing focus on expanding network infrastructure.
In Southeast Asia and South Asia, the market is seeing a boom in tower construction. Indonesia and the Philippines, traditionally lagging in tower development, are now experiencing significant investments. The acquisition of PT Solusi Tunas Pratama Tbk by PT Profesional Telekomunikasi Indonesia is a notable example of tower investment in the Indonesian market. Similarly, the Philippines is benefiting from new entrants like DITO Telecommunity Corp. and substantial infrastructure investments.
In line with this regional trend, Japan’s leading trading company, Sojitz Corp., has recently expressed a strong interest in investing in cell tower construction and co-location in the Philippines. According to Dita Angara-Mathay, a commercial counselor with the Department of Trade and Industry (DTI), Sojitz's investment aligns with the Philippines' need for enhanced telecommunications infrastructure. This initiative highlights Sojitz’s expanding role in various sectors within the Philippines, including infrastructure development.
In South Asia, India's tower market, while already undergoing consolidation through major mergers, still exhibits room for growth, particularly in rural areas and in relation to the upcoming 5G rollout. Southeast Asia is set to experience the fastest growth in the region, with a projected CAGR of 6.1% from 2022 to 2032.
Australia, New Zealand, and the Pacific Islands face unique challenges due to their geography, which makes tower construction more costly. Despite this, the region is expected to see a 4.6% CAGR, driven mainly by small cell deployments for 5G and infrastructure-sharing initiatives.
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Balancing Recovery and Growth
Rising inflation and interest rates have increased the cost of financing, leading to potential delays and downsizing of projects. The global chip shortage and disruptions in the semiconductor industry, particularly in Taiwan, have further compounded these issues.
As mobile operators and tower companies grapple with these challenges, there is a noticeable shift towards consolidation. Tower companies are increasingly acquiring passive assets from mobile operators to focus on their core competencies and manage debt. This consolidation trend is evident in several high-profile deals, such as PT XL Axiata Tbk’s sale of towers to PT Edotco Infrastruktur Indonesia and Globe Telecom Inc.'s tower sales in the Philippines.
Globe Telecom has completed its tower sale and leaseback deal with Frontier Towers, finalizing the sale of the last batch of towers. This wraps up the transaction involving a total of 6,628 towers. The final batch consisted of 84% ground-based towers and 16% rooftop towers.
In response to rising energy costs and sustainability concerns, there is also a growing focus on energy-efficient solutions and infrastructure sharing. Companies are exploring innovative approaches to reduce operational expenses and enhance network efficiency, which are crucial for managing the financial impact of increased capital and operating costs.
The tower industry in the Asia Pacific is at a pivotal moment, balancing recovery and growth with significant economic and operational challenges. While the sector has rebounded from the pandemic’s effects and is poised for continued expansion, particularly with the ongoing rollout of 5G, it must navigate a complex environment of rising costs, supply chain issues, and regulatory hurdles.
The industry’s ability to adapt through technological innovation, consolidation, and strategic investment will be crucial in shaping its future trajectory and maintaining growth momentum in the coming years.
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