The decision by IHS Holding Limited, the largest operator of mobile phone masts in Nigeria, to list its shares on only the New York Stock Exchange (NYSE) under the ticker symbol “IHS” indicates a neglect of dual-listing trends, according to some financial analysts.
IHS Holding Limited (IHS Towers) targets about $500 billion from its initial public offering (IPO) of 22.5 million ordinary shares, of which 18 million are being offered by IHS Towers and 4.5 million being offered by certain selling shareholders. The IPO price is currently estimated to be between $21 and $24 per share.
The underwriters of the offering have a 30-day option to purchase up to an additional 2.7 million ordinary shares from IHS Towers and 675,000 ordinary shares from the selling shareholders at the IPO price.
Though the NGX has not commented on this development despite WhatsApp messages sent four days ago (encouraging or discouraging this development), but it is worthy to note that many companies have their shares dually listed.
Oando plc is listed on the Nigerian Exchange Limited (NGX) and the Johannesburg Stock Exchange (JSE). Seplat Energy plc is listed on NGX and London Stock Exchange (LSE).
Guaranty Trust Holding Company plc (GTCO), listed on the NGX, has its global depositary receipts (GDRs) listed on LSE for 14 years now. Zenith Bank plc, a tier-1 bank on the NGX, also listed its GDRs on the LSE, a major step by the bank at improving liquidity in its stock.
Airtel Africa listed on the LSE and its secondary listing was on the NGX. MTN Group, which listed on the Johannesburg Stock Exchange, has shares of its Nigerian units listed by introduction on the NGX. Interswitch, a Lagos-based integrated digital payments and commerce company, is planning an IPO via a dual listing on the NGX and the LSE.
Like Jumia, IHS abandoned this dual listing trend for sole foreign listing, ignoring such benefits like access to a larger pool of potential investors. Dual listing improves a company’s share liquidity and its public profile because the shares trade on more than one market.
“I am an advocate of being a global citizen, but it is only right to also join development efforts in one’s primary market. How do you do business in a country and not promote the development of such market.
“If MTN and Airtel, which are some of IHS’ key clients, are listed in the Nigerian market, I see no reason why IHS should not consider it, especially with the benefits that come with such domestic listing,” says Abiola Rasaq, a Lagos-based financial analyst.
Although, Rasaq notes that the appetite of African-focused companies like IHS and Jumia to list on New York Stock Exchange is mainly due, perhaps, to wrong perception of the capacity of the local market “but this also reinforces the several imbalances in the country.”
The IPO prospectus at US SEC seen by BusinessDay reveals that the majority of IHS revenue comes from multi-national organisations (MNOs) that are subsidiaries of large, publicly listed multi-national MNOs, including MTN Group and MTN Nigeria, Orange Group, Airtel Africa, Zain Group, Telecom Italia and TIM S.A., Telefonica, America Movil and Millicom.
IHS intends to use the net proceeds from the offering to fund growth and for other general corporate purposes, and has not quantified or allocated any specific portion or range of the net proceeds to the company for any particular purpose.
Aside other countries, in 2014, IHS executed landmark transactions in Nigeria to acquire a total of 10,966 Towers. The company acquired 4,154 of these Towers from MTN Nigeria and 2,116 Towers from 9mobile in 2014 and the balance of 4,696 Towers from MTN Nigeria the following year.
In 2015, IHS expanded through the acquisitions of Airtel Zambia’s 949 Towers and Airtel Rwanda’s 200 Towers and further expanded in Nigeria through the acquisition of an additional 555 Towers from 9mobile. In 2019, IHS refinanced outstanding debt of its Nigeria operations (approximately $1.8bn), including issuing $1.3 billion of new senior notes, as well as new senior credit facilities, resulting in a more simplified debt capital structure, extended maturities and lower cost of debt.
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The IHS Holding IPO prospectus at the US Securities and Exchange Commission (US SEC) shows that the company is one of the largest independent owners, operators and developers of shared telecoms infrastructure in the world, providing its customers, most of whom are leading MNOs, with critical infrastructure that facilitates mobile communications coverage and connectivity for 596 million people in emerging markets, across three regions and nine countries.
The company says it has track record of growth during periods of macro-economic volatility, including in relation to foreign exchange (FX) rates.
“Despite the significant shortage of US dollar liquidity in Nigeria in 2015 and 2016, naira devaluations and the economic slowdown in Nigeria in 2017, 2018, 2019 and 2020, when real GDP growth was 0.8 percent, 1.9 percent, 2.3 percent and 1.9 percent, respectively, our revenue and segment adjusted EBITDA for our Nigeria segment continued to grow during that same period.
“Revenue for our Nigeria segment increased 12.1 percent, 8.6 percent and 3.8percent for the years ended December 31, 2020, 2019 and 2018, compared to the years ended December 31, 2019, 2018 and 2017, respectively, and segment adjusted EBITDA for our Nigeria segment increased by 25.5percent, 14.2percent and 6.1percent over the same periods, despite the Naira depreciating from an average rate of N305.3 to $1 for the year ended December 31, 2017 to an average rate of N385.7 to $1 for the year ended December 31, 2020,” IHS disclosed further.
“Our market position is backed by long-term contracts that we have a history of successfully maintaining. We have a presence across all the states of Nigeria, with coverage estimated at 80percent of the population.
“We believe that in Nigeria, we have delivered the majority of estimated demand for new site deployments by independent tower companies in the market over the last two years, and we are the only independent tower operator in five of our other markets.
“For the period covering 2018, 2019 and 2020 and the first six months of 2021, we have added 11,228 Tenants, 15,716 Lease Amendments and constructed 2,428 New Sites. As of June 30, 2021, we have built over 6,900 New Sites since our inception”, IHS said in the offer prospectus at US SEC.
“The capital market does not appropriately reflect the size of the economy, as reflected in the low market capitalisation-to-GDP which is far below peer frontier and emerging markets. The Nigerian market is not just the incubator of IHS; it remains the most important market to this critical infrastructure sharing entity,” Rasaq added.
The analyst believes that such public-interest entity should in the minimum be listed on the local Bourse, “even if it would consider a dual or secondary listing on the NYSE. Beyond the benefit of such to the company, it also provides a way of democratising the opportunities in the infrastructure sector”.
IHS Holding in the offer prospectus at US SEC noted that, “Our primary customers are the leading MNOs in each of our markets. We also provide infrastructure and services to a number of other communications service providers.
Our success in establishing deep customer relationships and operational excellence has enabled us to grow both organically and through 19 transactions, building a footprint that currently covers Nigeria, Côte d’Ivoire, Cameroon, Rwanda, Zambia, Brazil, Peru, Colombia and Kuwait.
“We are the largest tower operator in six of the nine markets in which we operate and we are the only independent tower operator of scale in five of these markets”.
“We are the largest independent multinational emerging-market-only tower operator and one of the largest independent multinational tower operators globally, in each case by tower count. As of June 30, 2021, we operated 30,207 Towers across five countries in Africa, three countries in Latin America and one country in the Middle East”, the company further stated.
Recently at the re-launch of the NGX Market Making programme, Temi Popoola, CEO, NGX, said the NGX was committed to tackling liquidity constraints and ensuring sustained flow of funds in the capital market.
“We recognise the importance of liquidity as a driver of participation in our market and are confident that Market Making will ease the barrier of entry and exit, whilst providing a measure of control over volatile price fluctuations.”
For the years ended December 31, 2020 and 2019 IHS Holdings generated revenue of $1.403 billion and $1.231 billion, losses for the period of $323 million and $423 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $819 million and $669 million, respectively.
For the years ended December 31, 2020 and 2019, the company had a loss margin of 23percent and 34 percent and its adjusted EBITDA Margin was 58percent and 54 percent, respectively. For the year ended December 31, 2020 compared to the year ended December 31, 2019, it realized year-over-year growth of 14percent for revenue, a decrease of 24 percent for loss and 22 percent growth for adjusted EBITDA.
For the six months ended June 30, 2021, HIS Holdings generated revenue of $764 million, a profit for the period of $77 million and adjusted EBITDA of $490 million, resulting in a profit margin of 10percent and an adjusted EBITDA Margin of 64.2percent.
For the six months ended June 30, 2021, it achieved a profit of $77 million, compared to a loss of $353 million for the six months ended June 30, 2020, and it achieved year-over-year growth in its revenue and adjusted EBITDA of 15percent and 30.7percent, respectively, compared to the six months ended June 30, 2020.
Foreign Direct Investment (FDI) into Nigeria’s telecommunication sector has declined by 20 percent in the past three to four years. FDI into the Nigerian telecommunications Industry in 2020 was approximately $417 million compared with $942.8 million recorded in 2019, which translates to a decline of 55.7 percent, according to a yearly report by the Nigerian Communications Commission (NCC).
The listing of IHS in only New York Stock Exchange, according to Rasaq, is in a way denying the country of potential FDI and Foreign Portfolio Investments (FPIs).
“IHS is an attractive infrastructure company that would have attracted global investor interest and improve local market liquidity with foreign currency (FCY) flow prospect and fiscal revenue opportunity for the country.
“Indeed, a sole foreign listing would also mean that IHS would require FCY to pay dividend to foreign shareholders, including even Nigerians and local institutional investors who may end up taking up some shares of the company on the NYSE, this would have been moderated if there is a local listing, with shareholders holding the shares on the Nigerian Exchange Limited (NGX) receiving their dividends in naira.
“These are some of the issues that saliently put Naira on a consistent pressure, undermine fiscal revenue and limits investment opportunities in the domestic market.
“Following the demutualisation of NGX, it is a lot more nimble and I believe its agility should enhance initiatives towards attracting growth companies and of course its scope. I also think the government needs to adopt moral suasion, incentives and market-oriented policies to attract listings.
“The benefit of having a deep and vibrant capital market cannot be overemphasized and there is no country that has achieved true development without a history of an active capital market reform,” Rasaq notes.
According to Rasaq, “Policies do not have to be punitive or forceful but it should be strong on moral suasion, incentives and of course should be built on a ‘give-and-take’ philosophy that clearly drives appetite for domestic market participation across key sectors of the economy.
“Imagine Apple leaving its home market, the US, to list in the UK or Alibaba leaving Hong Kong Stock Exchange to list on NYSE or LSE. I believe strongly and advocate for cross-border listings and should definitely be encouraged but not at the expense of local market development.”
Prior to the consummation of the offering, IHS Holding Limited, a company incorporated in the Republic of Mauritius under the Mauritian Companies Act 2001 as a private limited liability company, will be registered by way of continuation as an exempted company limited by shares under the Companies Act of the Cayman Islands.
IHS Holding does not anticipate paying any cash dividends on its ordinary shares in the foreseeable future, however, if it does pay a cash dividend on its ordinary shares in the future, it will pay such dividend out of its profits or share premium (subject to solvency requirements) as permitted under Cayman Islands law.
Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Citigroup Global Markets Inc are acting as joint lead book-running managers for the proposed offering.
RBC Capital Markets, LLC, Barclays Capital Inc. and Absa Bank Limited are acting as joint book-running managers for the proposed offering. Cowen and Company, LLC, Investec Bank plc, Renaissance Securities (Cyprus) Limited, FirstRand Bank Limited (London Branch), acting through its Rand Merchant Bank division, Academy Securities, Inc., Loop Capital Markets LLC, Samuel A. Ramirez & Company, Inc., Siebert Williams Shank & Co., LLC and Tigress Financial Partners LLC are acting as co-managers for the proposed offering.
