In recent years, the emergence and acceleration of the digital revolution has fundamentally altered the way we live, work, and play. Mobile phone users, of whom there are now over 5 billion world-wide1, have created a perpetual data loop, meaning that every interaction to and from our phones creates a trail of digital breadcrumbs which are transmitted to, and stored in, data centres. This wealth of data has led to an explosion in the creation of applications and services which, over time and with increased connection speeds, have become more useful and relevant to our everyday needs. The more refined they are, the more accurate they are and the more we use them. Round and round we go.
A significant driver of the rapid growth in data is mobile phone usage and the pace at which mobile internet connectivity has developed. In the late 2010s, 4G emerged as the dominant global mobile technology, surpassing 3G, with more than four billion connections. In the next few years 5G is likely to overtake 4G and is expected to account for one fifth of global connections by 20252. Coupled with the anticipated growth in digital interactions per user, forecast to reach 5,000 per day3, we are going see an immense amount of data flooding the airwaves. User demand for ever quicker connectivity, and the subsequent speed at which technology has developed, have been key to driving the pace of development. It took 41 years to reach one billion debit card users, 19 years for online banking to reach 1 billion users, 3G took 12 years and 5G is projected to hit the same figure in just over three years4.
With an ever-increasing amount of data being produced and transmitted, the demand for data centres, where this information is stored, continues to rise. But between the smartphone and the data centre lies a key piece of infrastructure. Vital to the data supply chain are telecom towers, without which the entire digital world would collapse. The owners’ business models are very straightforward. They simply erect a steel tower, bolt it to a concrete plinth, and rent space on the tower to network and communications companies to fix multiple microwave transmitters and receivers. The key requirement is for the user to remain in blissful ignorance of the technology operating behind the scenes which ensures they can remain connected as they travel, without interruption. The connection between towers and devices operates by ensuring that the signal to and from the device is passed from one tower to the next, often at high speed. To add to the complexity, the transmitters and receivers must be capable of providing the same high quality of service to thousands of users, regardless of the speed at which the devices move into and out of range of each tower. Fast and seamless connectivity is all that matters to the user, so a network of towers with excess capacity is required to ensure interruptions are kept to a minimum.
The towers themselves are a simple lattice framework which rarely need to be adapted to accommodate updated equipment as their tenants’ upgrade and improve their service. It is time-consuming and expensive for the service provider to build the infrastructure themselves and so instead, they rely on developers to build and maintain vast estates of towers, on which they simply rent space. Each slot on each tower is therefore highly sought after. Once the development capital has been invested, each tower has the capacity to host multiple tenants. They enjoy long rental contracts of five to ten years, high tenant retention rates of 80%-99%, and many leases contain contractual inflation-linked escalators.