23,800 additional African towers will be transferred from MNOs to independent towercos in six major deals announced in the second half of 2014, with further transactions imminent. African towercos now own or operate 47,600 (or 29%) of Africa’s towers.
The size of Africa’s tower industry doubled in two quarters, triggered by Airtel’s sale of towers in 16 of their 17 African countries (sales of 4,800 towers to American Tower, 3,500 to Eaton, 3,100 to Helios Towers Africa and 1,113 to IHS have been announced to date). The sale of Airtel’s Nigerian Towers, recently secured by American Tower, stimulated two other deals in Africa’s most lucrative mobile market, both of which were closed before the Airtel deal; Etisalat Nigeria sold 2,136 of their ~2,700 towers to IHS, while MTN sold all 9,151 of their Nigerian towers to the same counterparty, retaining a 51% stake in the joint venture.
Figure 1: Estimated number of towers owned or managed by towercos in Africa
TowerXchange believe a further 2,000 Airtel towers will be sold in early 2015. Our research suggests the transactions are pending regulatory approval only, with announcements imminent involving the transfer of Airtel’s towers in Gabon to Helios Towers Africa and in Madagascar to Eaton Towers. Airtel are set to retain their towers in Sierra Leone.
2014 concludes with independent towercos owning close to 30% of Africa’s towers, slightly less than we forecast as the complexity of the Airtel transaction has slowed other processes. Nonetheless, early next year we expect the aforementioned balance of the Airtel tower sale to be announced, plus the sale of ~3,500 towers currently owned by MobiNil in Egypt, where Eaton Towers are believed to be on a shortlist of two final bidders. Processes in Senegal, Mali and the Guineas, plus rumors of a potential tower sale by Telkom which could trigger repercussions in the attractive South African market, are unlikely to close before the end of Q1 2015. With the Airtel deal triggering follow-on deals, and with towercos growing 10-15% per annum organically by building the majority of the continent’s new towers, we’re sticking to our forecast that towercos will own 46.9% of Africa’s towers by year end 2015. That will represent the vast majority of the towers owned by credit worthy anchor tenants – the addressable market for towercos in Africa may be 55-60%.
Almost US$5bn of PE-backed towerco’s investors and American Tower’s money is now at work in the African tower sector, not including substantial equity stakes retained by MTN, Millicom and Vodacom. Sub-Saharan Africa has graduated to a new class of investor, and the price of participation in this maturing asset class is now likely well over US$100mn. Many commentators feel the three PE-backed members of Africa’s ‘Big Four’ towercos have now achieved the necessary diversification of country and counterparty risk to commence the final phase of integration and consolidation in the run up to trade sale or IPO.
While a glance at Africa’s tier one MNO’s remaining tower portfolios suggest a finite amount of investible assets remain operator-captive (see “What’s left?”), TowerXchange forecast that the Airtel deal will trigger a handful of follow-on deals in 2015.
As the ‘Big Four’ reach scale and focus on colo sales, efficiency programmes, and the drive to profitability, they may open up opportunities for ‘middle market towercos’ in markets considered too small or too risky for the ‘Big Four’ to be concerned with. Another opportunity for the aspiring new entrant towerco is Africa’s urgent need for a commercially viable proposition to build single tenant towers, even in markets where the ‘Big Four’ are active, particularly in low ARPU, off-grid areas – a tough combination of economics which attracts a unique breed of telecoms entrepreneur!
Figure 5: Forecast African towerco footprints
After 2014’s recent sell-out event, TowerXchange are looking forward to once again hosting the top 250 decision makers in African towers at the next TowerXchange Meetup Africa, moving to the prestigious ballroom at the Sandton Convention Centre on October 1 and 2 2015
