On October 4 IHS Towers' Form F-1 registration statement was published at the US Securities and Exchange Commission relating to an IPO on the New York Stock Exchange. Following rumours of a postponed IPO in 2018, and some buzz during late 2020, all eyes have been on IHS Towers as it has expanded out of its African heartlands to become a globe-trotting towerco giant. With over 30,000 towers across three continents and Q2'21 revenues of US$402mn, IHS Towers’ original investors are now ready for it to go public. In this article TowerXchange takes a look at what we know about the IPO so far, the current state of play at IHS Towers and how the business compares with its peers.
What do we know?
After reportedly exploring an IPO in 2018, IHS Towers published a brief press release on Friday 14 August 2020 announcing it was exploring a potential registered IPO in the US. On October 4 2021 IHS Towers Form F-1 was published. Goldman, Citi and JPMorgan are joint lead underwriters on the offering.
Last year Bloomberg reported that the towerco was aiming for a valuation of US$7bn, something which is confirmed in the October 4 publication, with IHS Towers reportedly seeking to raise about around half a billion dollars in New York. Despite increased revenues, site count, tenancies, EBITDA and a positive net income last quarter, the published valuation has not increased much further.
IHS Towers’ 30,207 tower portfolio generated over US$1.5bn in revenue and US$943mn in Adjusted EBITDA in the 12 months to Q2'21. Figures from the company’s August 2021 presentation indicate an EBITDA margin of 68.4%, a healthy margin in anyone's book. IHS Towers has also shared its current tenancy ratio, which sits at 1.51x following the acquisition of sites in a number of new markets (this is down from 1.54x this time last year due to the acquisition of some LATAM sites with lower than average tenancies).
We can compare IHS Towers to other African towercos. Eaton Towers’ tenancy ratio was 1.5x when it was acquired by American Tower for a 13.2x EBITDA multiple. This is below Helios Towers' current 1.99x tenancy ratio and its current 13.4x EBITDA multiple valuation. It is possible that IHS Towers is dipping its toes in the water as it builds its start of the book building, and it may seek an IPO at a higher valuation later.
IHS Towers’ owners include AIIM, ECP, FMO, GIC, Goldman Sachs, IFC, Investec, KIC, MTN Group and Wendel. MTN’s recent annual report explained they were divesting their remaining investment in towercos, and an IHS Towers’ IPO is necessary before MTN can effectively unload their shareholding. Similarly, TowerXchange understands that a number of the development finance organisations which have backed IHS Towers are keen to realise their investments now IHS Towers is a mature business.
Who are IHS Towers?
IHS Towers began in 2001 as a tower builder in Nigeria. In the years that followed, the company began maintaining towers for MNOs too before eventually beginning to offer co-location services in 2009. The company completed its first major tower deal in 2010 with the acquisition of 800 Visafone sites, and then gained significant scale in Nigeria with a c. 9,000 site tower deal with MTN (with IHS and MTN creating a joint venture into which the assets were placed) and two deals with Etisalat (acquiring 2,136 towers followed by a 555-tower deal).
In a wave of deals from 2013-2015 IHS Towers entered Cote d’Ivoire, Cameroon, Zambia and Rwanda. At the start of 2016 IHS towers operated 21,132 towers and was poised to consolidate its position as Nigeria’s leading towerco by acquiring Helios Towers Nigeria’s 1,211 sites.
During its past acquisitive stage in Africa, IHS Towers signed deals with MTN in Cameroon, Cote d’Ivoire, Zambia, Rwanda and Nigeria, with Orange in Cameroon and Cote d’Ivoire, with Airtel in Zambia, Rwanda and Nigeria, as well as a number of other acquisitions in Nigeria, including deals with Visafone, Etisalat, Hotspot Networks and Helios Towers Nigeria. The result is a portfolio weighted towards Nigeria and Africa’s three leading MNOs: Orange MTN, Orange and Airtel.
Despite exploring an acquisition in Saudi Arabia, IHS Towers would have to wait until early 2020 for its geographic diversification strategy to reach fruition. In short order IHS Towers added four new countries to its portfolio; substantial portfolios in Kuwait and Brazil, as well as smaller bridgeheads in Colombia and Peru. As in Africa, its tenants are principally Tier 1 MNOs in their markets, Claro, Vivo, TIM and Zain. Geographic diversification has become an important part of IHS Towers’ strategy, with the towerco being linked to potential deals in the Philippines, Ethiopia and Egypt too.
A planned 2018 IPO never reached consummation due to political difficulties in Nigeria which have since been resolved, but IHS Towers began to establish credibility in the international capital markets in 2016 with the issue of a US$800mn bond. In 2019 this was refinanced with a new US$1.3bn bond, with another US$130mn of debt added in 2020. Bloomberg report that the company was looking to raise US$1bn in its planned IPO, leaving the company with plenty of ammunition for its medium-term goals of continued organic growth, inorganic expansion into growth markets and exploration of adjacent sectors like fibre.
From beginning as a tower builder in Nigeria, IHS Towers has grown to be the fourth largest multi-market independent towerco in the world, with 30,207 sites, a tenancy ratio of 1.51x and a deal history spanning 18 major transactions in three regions and nine countries.
Figure 1: Where IHS Towers own sites
What’s next?
In IHS Towers’ existing markets, macro indicators and telecom trends favour the operator. Highlighting trends from 2019 to 2024 shows why IHS Towers thinks now is a good time to go public. The population in its nine markets will grow from 594mn to 644mn, and maintained its median age of 20 years old. Mobile penetration should also leap from 94% to 101% of this larger population over the same period. While 5G growth will be limited outside Kuwait, in IHS Towers' other markets 4G penetration should grow from 17% to 41% creating new opportunities for BTS and amendment revenues. All in all, an additional 36k towers and 101k points of presence are predicted across IHS Towers’ markets.
Also on October 4 IHS Towers signed a shareholder agreement with Egypt Digital Company for Investment, an investment vehicle of the Egyptian Ministry of Communications, to form a joint venture, IHS Egypt. IHS Egypt, it is hoped, will be incorporated and licenced before the end of 2021 to acquire, operate and/or manage portfolios of tower assets in the North African country. Under the terms of the license, and subject to the fulfillment of certain conditions, IHS Egypt will have a commitment to deploy 5,800 sites over a three year period, of which we expect 70% to be new towers built by IHS Egypt.
IHS Towers' IPO is an important stepping stone for the towerco as it grows into a global emerging market towerco leader. TowerXchange expects to see the IPO take place within weeks, and we will post further analysis and comment once the IPO is complete.
