Money flooding into infrastructure slows to a trickle in Africa. Investors see too many countries there as risky.
Telecoms could be the sector that proves the exception to that rule.
Helios Towers, which operates the masts needed by mobile networks, is planning to list its shares on the London Stock Exchange, following an abortive attempt last year.
It should find a more receptive audience this time. Think of Helios as a real estate business. In this respect, it is like American Tower, the world’s largest by market value, which converted into a real estate investment trust.
Helios has nearly 6,900 towers of which 79 per cent sit in the Democratic Republic of Congo and Tanzania.
Both countries have relatively low mobile phone coverage, even for 4G.
Helios buys or builds new towers and then rents space out to local operators.
Adding towers requires capital; adding tenants raises profitability.
Average tenants per site have risen to over two as of June. Typically there was only one per site in 2011. Gross cash flow (before tax) per tower rose 8 per cent year-on-year in the second quarter to about $3,000 monthly.
What might Helios be worth? One possible comparison is Helios’s African rival, Eaton Towers. American Tower bought this for an enterprise value of $1.85bn in May.
That was a multiple of roughly 12 times ebitda. Helios plans to raise about $125m worth of new equity, plus sell some of the holdings of current investors.
Assuming that full year ebitda grows at a conservative 10 per cent, Helios should easily manage a $2bn valuation.
Frankly, would-be consolidator Helios, could go for a higher multiple.
Note that both Spain’s Cellnex and Inwit of Italy trade closer to 18 times ebitda. Ratios more common to growth stocks belie the image of these infrastructure companies as yield plays. Shares for both of these have sizzled this year.
Cellnex alone is up by 78 per cent this year. Even with a higher risk premium for Africa, Helios should be well received by the market.
