IHS, MTN in talks over $1bn telecoms tower deal in Nigeria

IHS, Nigeria-listed tower company is holding exclusive talks with South African operator MTN over the sale of the latter’s $1bn plus wireless towers portfolio in Nigeria, Africa’s largest economy by GDP, after staving off competition from American Tower Corp (ATC), according to TMT Finance.

According to sources, several parties including ATC and IHS bid for the asset which encompasses around 9,000 towers across Nigeria. Sources close to both companies say advanced negotiations are now taking place between IHS and MTN as the deal is expected to be tied up in a matter of days. According to informed sources, ATC bid very aggressively for the portfolio, but was unable to compete with IHS, which already has a significant presence in Nigeria. To fund the acquisition, IHS, it was gathered is in the process of putting together a near $1bn financing package. The early information received from sources inside some of the banks involved in the deal, is that the financial package will include around $500m in bank loans, with the remainder is to be funded via equity financing. The debt package will be split into two $250m loans, the terms of which are still being ironed out, informed sources have said.

 It is still unclear if IHS will require new equity financing, as the tower company secured $550m from shareholders including Goldman Sachs, the IFC Global Infrastructure Fund, Macquarie-backed African Infrastructure Investment Managers (AIIM) and Emerging Capital Partners, earlier in 2014. As part of that package, Standard Chartered provided around $70m in debt. Citi is advising MTN, while UBS and Goldman Sachs are thought to be advising IHS. Several other international banks are helping to arrange the debt financing package, including BNP Paribas and Standard Chartered. ATC is not thought to have appointed a financial adviser for its bid. Post-deal, IHS will have an impressive footprint in Africa’s largest economy and will be the largest tower company in Nigeria.  In recent weeks, India’s Airtel and United Arab Emirates’ (UAE) Etisalat have both sold Base Transceiver Stations (BTS) to tower companies, in a move that indicates the adoption of a business model predicated on reducing operational costs to free up requisite resources for service and marketing oriented activities, to further compete more effectively. Etisalat disclosed recently it would sell 2,136 of its towers to IHS Nigeria and lease them back as part of broader plans to expand its coverage in Africa’s most populous nation.

 Bharti Airtel said it has entered into strategic agreement with Helios Towers Africa (HTA), independent telecoms Towers Company, for the divestment of 3,100 of its towers. Moreover, IHS is also thought to be among the two buyers for Bharti Airtel’s 5,000 or so Nigerian towers, alongside Helios Towers Nigeria. Negotiations are said to be ongoing for that deal, after the process was said to be stalling in light of local shareholder issues and disagreements over lease-back rates. 

Should IHS acquire the MTN and half of Airtel’s portfolio, its total towers count in Nigeria will be somewhere in the region of 18,000, according to TMT Finance. In sub-Saharan Africa, especially Nigeria, the rising cost of doing business is becoming a source of concern to telecom operators and stakeholders alike, with increase in expenditure and constant reduction in profit margin. Telecoms carriers in Africa are offloading the assets, which cost more to run on the continent than in other parts of the world because of the need for backup generators and batteries to guard against power failure, as well as widespread diesel pilferage. Telecoms operators in the country spend over 60 percent of their operating cost on power generation.

Ben Uzor