TowerXchange thought we’d take another look at the Nigerian tower industry in the light of the potential transfer of an estimated Nigerian 18,000 towers from operator-captive to independent towercos before the end of 2014. If Hotspot Network’s example is typical, showing the cost a a Nigerian cell site to be around US$236k, then the replacement value of the tower assets coming to market in Nigeria would be around US$4.25bn.
Nigeria is critical to the profitability of Africa’s tier one MNOs, who seem to have reached a consensus that their tower assets are no longer a source of competitive differentiation – either that, or they simply don’t want their towers to become stranded assets on their balance sheet as their competitors sell!
Airtel’s Nigerian towers are to be sold as part of their pan-African tower deal. The process to sell MTN’s towers has been under way for several months. And Etisalat appointed advisors at the turn of the year with a view to divesting their Nigerian towers. Incumbent towercos IHS, Helios Towers Nigeria and SWAP already own and operate an estimated 4,400 Nigerian towers.
Glo, who are not reputed to be big fans of sale and leaseback transactions, seem unlikely to divest their assets, while many of the towers belonging to the former CDMA operators, now consolidated into Capcom, were sold several years ago. According to BMI’s analysis of the Nigerian market in TowerXchange, “SWAP sealed an US$81.4mn sale and leaseback deal with Starcomms in December 2010 for 407 of the CDMA operator’s 557 towers. The agreement was for an initial 15 years. For its part, HTN signed a long-term tower lease agreement worth hundreds of millions of dollars with Multilinks and claimed it was owed around US$252mn at the time former parent company Telkom South Africa was looking to divest its stake in 2011. Starcomms and Multilinks suffered subscription losses and have recently been acquired by Capcom.”
These prospective transactions take place against a backdrop of a particularly challenging cell site energy situation in Nigeria; 50% of Nigeria’s towers are off-grid, with a further 40% on unreliable grids. At the recent GSMA Green Power for Mobile Working Group in Lagos attended by TowerXchange, it was reported that an average of five hours of power was available per day at Nigerian cell sites, with only 60% of that usable due to poor quality. Diesel theft remains a major concern in Nigeria.
Substantial BTS and amendment revenue opportunities are also present in Nigeria; “New towers are being deployed at a rate of 4-5,000 per year. The 2G & 3G Base stations (including rooftops and other PoPs) are growing at 7-8000 per year, about half with 2G equipment, half 3G,” said Inder Bajaj, CEO of Helios Towers Nigeria in a recent interview with TowerXchange. Other positive factors for towercos and investors interested in Nigerian towers include the absence of fixed line service, LTE moving from trial to launch, and the potential for mobile subscriber penetration and mobile data usage growth. There is the potential to achieve healthy tenancy ratios in Nigeria; according to HTN’s Bajaj the pioneering towerco has “800 greenfield sites on which we have tenancy ratios of 2.6, which is one of the highest tenancy ratios in the global tower industry.”
“All of the Nigerian operators should be looking to put their towers on the market. Whoever sells their towers first gets the best valuation,” asserted Fazal Hussain, former CEO of SWAP
