MTN is unlikely to sell its quarter stake in Nigeria-based tower operator IHS for the next three to five years, group CEO Ralph Mupita has told investors.
Africa’s largest mobile operator by subscribers started working in 2019 to reduce debt and streamline its business. The group set out to raise R25 billion (₦592 billion) by selling noncore assets in an “asset realisation programme”.
In October 2021, IHS Towers made its US stock market debut, listing on the New York Stock Exchange. At the time, MTN owned about a third of the company and was thought to be on a path to a bumper payday, when it would eventually sell down the investment.
By June 2021, the group estimated the value of that 29% equity at R30.5bn (₦710 billion). Selling down this stake, plus other moves such as repatriation of funds from Nigeria, were billed as ways to wipe out the group’s debt.
Unfortunately, market conditions have seen IHS lose half its value since listing. Having debuted at $16.69 a share, it now trades at $8.35. And even with a weaker rand, MTN’s piece of IHS, now 26%, is worth about R14bn.
Similar market conditions scuppered Telkom’s efforts to list its tower business Swiftnet on the JSE a few months later in early 2022. Telkom had valued the unit at R13bn but failed to get even three-quarters of that when testing the market.
Against this background, Mupita and his team decided to hold on to IHS, at least in the medium term.
“When we started this programme the main anchors around ARP were really further localisation in Nigeria and IHS,” Mupita told attendees at the group’s capital markets day on Thursday.
“Now with IHS, with where the share price is, for us it’s not a monetisation opportunity. When we reflect on where [exchange] rates have moved and where tower companies are trading, we are not in a rush to look to monetise and I think it’s fair to say to our capital holders that our view is, in the near to medium term, I don’t think you should anticipate a sell-down of our 26% share in IHS.”
The listing of IHS was a big part of the plan that also includes pulling out of unstable, war-torn countries in the Middle East to focus on lucrative African markets, where the company is building new streams of income in financial services, gaming and music streaming.
Mobile phone companies have been offloading towers and masts to dedicated infrastructure companies and renting back the space, allowing them to raise money to expand their networks and wipe out maintenance costs.
In mid-2022, MTN completed a deal which saw IHS take ownership of and lease back 5,700 towers to the mobile operator.
Mupita’s position is also helped by MTN having been able to clear a large chunk of its debt in recent years. It is now in its strongest cash position in nearly a decade.
“We don’t have to do it [sell] because the balance sheet is in a good position. For those of you who are calculating and looking at IHS and say ‘these guys will sell in the next one or two years’, obviously you must make your own investment views, but our view is that we are in a kind of hold position with IHS,” he said.
“It’s not responsible for us to try and sell any of those. Let’s see what happens to rate markets over time.”
His remarks come at a time when telecoms infrastructure appears to be gaining favour with industry players.
Rival Vodacom is in the process of creating a separate company that will own and manage its towers. Former Telkom CEO Sipho Maseko is said to be at an advanced stage with a bid to take control of the fixed-line operator, having sold a vision that, in part, sees the creation of a pan-Africa infrastructure player that includes cellphone towers.
Mupita also said that some international investors may be tired of IHS’s exposure to Nigeria and headaches associated with operating there, tainting perceptions.
“So there is also a proximity to or at least a view on what’s happening in Nigeria with IHS,” he said.
For now, the message appears clear.
“We are not looking, in the near term, to be selling that down. But if things happen in the future, we’ll add to that discussion.”