Africa News (Aug 2014)

Agence Ecofin reports that Djezzy has launched 3.5G services in seven provinces of Algeria. Meanwhile, Algeria Telecom’s mobile arm, Mobilis, is rumoured to be extending its business-oriented fixed-wireless LTE service to consumers. TeleGeography’s CommsUpdate, report that Mobilis have already deployed 200 ‘eNodeB’ sites across the country, with plans to install 2,000 LTE-enabled base transceiver stations by year end 2015.

Tier one MNOs MTN, Airtel and Vodacom may all be interested in Angola’s rumoured third license, believed to be being made available later this year. There are currently no independent towercos in Angola, despite otherwise attractive fundamentals, largely because of the current MNO duopoly between Unitel and Movicel.

MIC’s Tigo Chad is investing US$200mn over the next five years to develop infrastructure. The imminent arrival of an independent towerco in Chad, via the sale of Airtel’s towers in the country, may further facilitate Tigo’s cell site densification as they move to 3G and 4G. MIC themselves have previously divested tower assets in Africa (Ghana, Tanzania and DRC) to Helios Towers Africa.

Tariff-busting Vietnamese operator Viettel has announced the extension of their vision to create a substantial African portfolio by targeting the acquisition of a telecoms licence in DRC. A holding company named ‘Viettel Congo DR’ has been created, while rumours have long been circulated that Supercell’s license could be acquired. Viettel already operates in Mozambique and will soon launch in Cameroon and Burundi. Viettel is believed to have applied for a license in Burkina Faso.

All Africa report that sole and national operator Ethio Telecom have added 410 new cell sites and added capacity to serve 400,000 4G customers in capital Addis Ababa.

While Etisalat, Unitel and MTN had been linked with a bid for Orange’s 70% controlling stake in Telkom Kenya, Business Daily Africa identifies Nigeria’s MegaTech Engineering as having placed the highest bid at KES25 billion (USD280.2 million), ahead of rival suitors Viettel (KES10.6 billion) and an unidentified British consortium (KES16.3 billion).

Lazard are believed to be advising Orange on the sale. Telkom Kenya has not reported a profit for seven years.

Safaricom is closing in on the acquisition of the base stations and transmission infrastructure of Essar Telecom Kenya, which trades under the yu brand name, while Airtel Kenya are believed to be acquiring yu’s customer base.

Francis Wangusi, DG of the Communications Authority of Kenya has hinted at another drive to compel Kenya’s operators to share infrastructure. Historically market-leader Safaricom has stopped short of full participation in infrastructure sharing, while Airtel’s Kenyan towers are likely to be sold imminently, with Eaton Towers in pole position to acquire the assets.

With Orange’s Kenyan management team recalled and the future of Telkom Kenya’s ownership uncertain, Orange/Telkom Kenya’s contract with Eaton has been cancelled. The Eaton team remains on the ground in Kenya whilst Airtel’s assets in the country remain up for grabs.

The value of another of the tower portfolios for sale by Airtel, in Niger, has been boosted by the recent award of a 15-year 3G licence to the Indian-owned market leading MNO.

Having been widely rumored to have stayed out of the bidding for Airtel’s African towers, it appears American Tower (AMT) are back in the game with a bid for MTN’s 9,000 towers in Nigeria, which could attract a valuation of over US$1bn. MTN’s process had been under way for several months, and the 23 May bid deadline meant the opportunity was widely discussed among the 220 tower industry leaders attending the TowerXchange Meetup in Florida on May 20-21.

AMT has not closed a tower deal in Africa since 2011, with power strategists at African operators reporting that AMT’s preference to structure transactions with power passed through to the tenant made the US giants a less attractive partner than IHS, HTA or Eaton Towers. It remains to be seen whether AMT’s bid includes an assumption of responsibility for energy logistics in Nigeria.

TowerXchange expects Helios Towers Nigeria and IHS to bid aggressively for the assets, having made their home market of Nigeria their number one priority.

Targeting a tower count of 8-10,000 by the year end, and with Airtel and MTN’s Nigerian towers still ‘on the block’, Helios Towers Nigeria (HTN) issued US$225mn of senior unsecured notes maturing in 2019 through fully owned Dutch finance subsidiary, Helios Towers Finance Netherlands B.V.. According to the Financial Times, the bonds will yield at just over 8%.

According to one banker, familiar with African tower finance, “independent towercos are an infrastructure and heavy asset based business, which lends itself to the bond market. For example, several US towercos have issued highly rated bonds, and some of the emerging Asian players have issued bonds.

Some African towercos that meet certain criteria are starting to consider high yield bond issuance, perhaps by refinancing their bank debt through high yield bonds. They might have pay a bit more, but it’s an attractive option because you can extract cash and payoff the investors sooner."

If HTN’s bond issue is well received and investors get comfortable, other towercos will doubtless follow a similar path.

Whilst rating Helios Towers Nigeria and their proposed bond ‘B(EXP)’, Fitch Ratings noted: “HTN is the second-largest independent tower company in Nigeria (based on the number of towers) with 1,187 towers at end-2013... HTN benefits from a visible revenue stream driven by long-term lease agreements, which comprise embedded contractual escalators and, in some cases, cost pass-through mechanisms. Following the shift in the market from CDMA to GSM operators, over 75% of revenues are derived from three major Tier 1 GSM players, MTN, Etisalat, and Airtel, which are all backed by investment-grade parents. As at 31 December 2013, the average remaining life of all tenancy agreements was 4.8 years, and HTN had total contracted revenues of USD352m."

TMT Finance reports that “disagreement over leaseback rates, further complicated by an ongoing dispute between Bharti Airtel and the minority shareholders of Bharti Airtel Nigeria,” are delaying Airtel’s Nigerian tower sale. The dispute may relate to the ongoing legal battle between Airtel and Econet Wireless, who claim rights to a 5% stake in the business dating back to Airtel’s original acquisition of Zain’s African assets.

Bloomberg quote Communications Technology Minister Omobola Johnson saying “For every naira that is spent on infrastructure, about 70% is spent on taxes. We’re going to bring that down to a much more reasonable level at 30% to 40%.” It seems that state and local authorities are heavily taxing cell sites as a way of sidestepping Nigerian laws which only allow the federal government to tax mobile phone companies.

IHS paid out US$118mn to buy out equity holders in the small stake in the company previously listed on the Nigerian stock exchange.

An international tender has been launched for the auction of a third mobile licence in Togo, covering 2G, 3G and 4G. Submission of offers is due by October 1, 2014. Togocel and Moov, recently acquired by Maroc Telecom, currently share the Togo mobile market between them; the launch of a third operator could make Togo a much more interesting market for Africa’s towercos.

As Airtel’s Zambian towers come to market, hard on the heels of MTN’s tower sale to IHS in the same country, 4G is emerging as a near-term driver for tenancy ratio growth as the independent towerco business model takes root in Zambia. The Zambia Daily Mail report that Airtel Zambia is investing US$80mn in it’s network in 2014, including in the rollout of 147 4G sites in Lusaka and Copperbelt, and rural network extensions adding a further 353 3G sites. Airtel are believed to have 1,096 base stations in Zambia.

We’re delighted to welcome Hal Hess to TowerXchange’s ‘Inner Circle’, our informal network of advisors who help shape the editorial content and strategic direction of our community.

Hal first joined American Tower in 2001 as CFO for American Tower International, later serving as EVP, General Counsel and Secretary of American Tower Corporation, before taking up his current role with the LatAm remit in 2007, adding responsibility for EMEA in 2009.