GO, a major telecoms provider, has announced that it will be selling its network of cellular towers to BMIT, a majority-owned subsidiary engaged in the provision of hosting and managed IT services.

The transaction is expected to be mutually beneficial. GO will be allowed to focus on its core business operations and end-customers, “resulting in operational advantages”.

For BMIT, the acquisition signifies a major part of its diversification strategy, which it is accelerating in view of market shifts in its core data centre services.

The cell towers in question are passive structures comprising of items such as beam reinforcements, poles, counter-balances and stays, placed on rooftops or ground of third party commercial or residential premises, for which GO is currently liable for lease payments.

These towers are used by GO to install active cellular equipment necessary for the provision of its mobile telephony services.

The proposed transaction will involve the acquisition of the passive telecoms assets together with the corresponding maintenance functions and all related agreements, and the transfer of an employee.

The most important related agreement regulates the provision of hosting, co-location and maintenance services to GO, for an initial thirty-year period, to be automatically renewed for further periods of five years unless otherwise agreed between the parties in writing.

Moreover, in terms of this agreement, GO shall be required to deliver to BMIT approximately 30 new “Built-to-Suit” passive network infrastructure sites across the Maltese Islands (“BTS Sites”) and transfer the BTS Sites to BMIT by the end of 2030.

All transferred sites will be managed by BMIT, in respect of which GO shall also be obliged to pay an annual service fee.

A Maltese InfraCo?

In its half yearly results, BMIT noted that despite a significant 17.3 per cent increase in revenue as compared to the corresponding period of the previous year, the lower profits derived from cloud and managed services when compared to data centre services mean that its profitability remained almost unchanged, with the accompany only generating an additional €100,000 in profit against a €2.19 million increase in revenue.

“Cloud services operate on a distinct cost and pricing model compared to data centre services,” it said. “While data centre services require a higher capital outlay, they also offer healthier margins and longer-term commitments, typically spanning over one year. On the other hand, cloud services operate on a subscription-based pricing model with a much lower upfront investment or none at all.”

It also noted that the cloud market faces “intense competition”, leading to “price pressure and potential margin erosion.”

BMIT Technologies stated that it is mitigating the “threat to profit margins” posed by the widespread adoption of cloud services by enhancing its managed private and hybrid cloud offering and seeking new partner collaborations to expand its services.

It is also accelerating efforts to diversify its business, continuing its transformation into a managed hybrid IT provider and strengthening its cybersecurity portfolio, wherein it aims to offer enhanced managed solutions, consulting, technical advisory and support services.

Another element of this diversification strategy is through an investment in infrastructure to reinforce BMIT Technologies’ position as one of Malta’s leading technology platforms and solutions providers, with its acquisition of GO’s cell tower network positioning the company as a Maltese “InfraCo” (infrastructure company) backed by long-term, contracted revenues.