MTN Group Limited announced that it has agreed to sell its tower portfolios in Rwanda and Zambia to IHS . MTN will sell a total of 1,228 mobile network towers to IHS’s subsidiaries in Rwanda and Zambia, comprised of 524 and 704 towers respectively, for undisclosed amounts.
The sale of the towers is in line with MTN’s asset optimisation strategy which is encompassed in MTN’s new strategic framework and builds on two previous deals with IHS in Cameroon and Cote d’lvoire, for a total of 1,758 towers. “In addition to unlocking value in our passive infrastructure, we remain cognizant of the need to contain and efficiently manage our cost structures across the Group as our markets mature and become more competitive. We are confident these transactions are a positive step towards freeing up management time to focus on products and services, thereby fulfilling our mission of ‘making our customers’ lives a whole lot brighter’” said Sifiso Dabengwa, Group President and CEO of MTN Group. Mr. Dabengwa added, “MTN is pleased to be broadening our partnership with IHS, a leading tower operator with proven expertise across Africa, to our operations in Rwanda and Zambia.”
Issam Darwish, Group CEO of IHS commented: “We are delighted to be extending our relationship with MTN in Rwanda and Zambia. These latest deals are testament to our commitment to client service, enabling the most efficient, effective and reliable networks for our clients. Our strong and trusted relationship with MTN is important to us and we remain committed to reinforcing their focus on customer service excellence.”
Under the agreements, IHS will acquire and operate the towers and related passive infrastructure and will invest in a build-to-suit program to support MTN’s future requirements in both countries. MTN Rwanda and MTN Zambia will become the respective anchor tenants on the towers for an initial term of ten years.
The transactions bring the total number of towers in IHS’s portfolio to 10,500 extending its leadership in the African market. IHS will market services on the towers in Rwanda and Zambia, promoting tower sharing and colocation to help drive network improvements, better service to subscribers and economic growth.
Each transaction is expected to close independently during the first half of 2014, subject to customary closing conditions.
TowerXchange’s analysis of IHS’s latest deal with MTN
Securing MTN’s towers in Rwanda and Zambia continues Issam Darwish and IHS’s record of bidding aggressively and winning deals against Africa’s other ‘Big Four’ towercos. This is the second time IHS has partnered with Africa’s leading operator, having acquired MTN’s 1,758 towers in Cameroon and Cote d’Ivoire for US$284mn in late 2012.
It’s difficult to assess a tower deal without knowing the acquisition price and lease rate, but the Rwandan and Zambian markets are certainly attractive.
With MTN’s tower assets in South Africa apparently off the table, at least for now, the 1,228 towers they have sold in Rwanda and Zambia were considered one of the most investible telecoms infrastructure assets in Africa. The two countries have relatively low political risk, and have solid GDP growth in the 7-8.5% range.
Potential for further tower deals in Rwanda
MTN is the market leading operator in Rwanda, with 56.1% market share in June 2012 (Source: BMI, RURA, Operators). Almost as important as the strength of IHS’s anchor tenant is the credit worthiness of Rwanda’s other licensed operators and prospective tenants, Tigo and Airtel.
IHS’s last deal with MTN in Cameroon and Cote d’Ivoire was followed not long after by the same towerco securing Orange’s towers (on a managed services deal), and IHS is now well positioned to take a similarly dominant position in Rwanda should additional towers come to market. There have been unconfirmed rumours of Tigo’s interest in selling their towers in Rwanda, while Airtel is believed to be selling all 15,000 of their towers across Africa.
Independent towers could ease capacity challenges in Zambia
ZICTA reports that mobile penetration in Zambia is at 78%.
Airtel and MTN vie for market leadership in Zambia. Cell Z, mobile arm of Zamtel and subject of a legal dispute between the Zambian government and LAP Green Networks, follow as the third ranked operator.
A fourth MNO license has been mooted for some time. The availability of independent towers has accelerated new market entrants in the past, as we saw with Africell leveraging Helios Towers in the DRC, so the establishment of an independent tower market in Zambia is likely to be good news for whichever operator wins the fourth license.
Earlier in 2013 the Zambian government threatened the existing three operators with legal action due to QoS issues, which points to the opportunity for IHS to help operators ease capacity challenges. When an independent towerco enters a new country, they often secure substantial BTS opportunities, although the scale of such opportunities in Zambia and Rwanda has not yet been confirmed by IHS.
IHS reaches scale
This latest transaction brings IHS’s tower count beyond the 10,000 tower ‘magic number’, which many analysts figure to represent ‘scale’ for the independent towerco business model. IHS now has a total of approximately 10,500 towers in Africa (5,750 owned, 4,750 managed), making IHS Africa’s largest towerco. In addition to Rwanda and Zambia, IHS also has towers in Nigeria, Cote d’Ivoire, Cameroon, Sudan and South Sudan.
IHS is unlikely to rest on its laurels. The towerco has raised over US$1bn in capital to date from investors such as the IFC, Wendel, ECP, FMO, Investec and one of Asia’s premier sovereign wealth funds, and is expected to continue to be an aggressive bidder for the further 30,000 African towers are believed to be currently on the market.
Recommended further reading: BMI’s view of the tower market in Rwanda and Zambia, and “How IHS creates shared value” published exclusively in the TowerXchange Journal.