IHS Towers has further expanded its LATAM footprint with the acquisition of 2,115 sites from Grupo Torresur. The deal is a partial acquisition of Grupo Torresur’s sites in Brazil and sees IHS Towers’ count there grow to at least 6,465 sites. IHS Tower is paying US$315mn in cash for the 2,115 sites of São Paulo Cinco Locação de Torres Ltda. (“SP5”), a Grupo Torresur portfolio company. Torresur owned over 2,800 sites in Brazil, so this deal leaves Torresur with a small portfolio of sites elsewhere in the country. The deal, which is expected to close later in Q1 2022, is only the latest in a string of acquisitions which has seen IHS Towers grow to substantial scale in Brazil.
What IHS Towers has been buying
IHS Towers first entered Brazil in 2019 through the acquisition of Cell Site Solutions, a deal that also included other sites in Peru and Colombia. Since then, IHS Towers has focused its LATAM growth on South America’s largest country. In 2021, IHS Towers acquired Skysites, a Brazilian towerco, and later it acquired 602 towers in Brazil from Centennial Towers in a transaction that included additional assets in Colombia.
In late 2021 IHS Towers closed its transaction with TIM Brasil to acquire a controlling interest in FiberCo Solucoes de Infraestrutura. The fibreco was renamed I-Systems and IHS would own a 51% stake, while TIM controls the remaining 49% interest. The secondary fibre network passes approximately 6.4mn home. The acquisition of SP5 is just the latest demonstration of IHS Towers commitment to enter and grow in emerging markets outside Africa.
Commenting on the deal Sam Darwish, IHS Towers Chairman and CEO, added: “Today’s announcement is a wonderful milestone as, over the past two years, we’ve increased our tower count in Brazil from approximately 2,000 towers to almost 7,000 towers pro forma, in addition to acquiring 70,000km of fibre strands, resulting in US$1.2bn of cumulative investment. This is a testament to our commitment to Brazil, as we work to help meet the need for reliable and innovative communications infrastructure in the country and the wider LatAm region.”
The Grupo Torresur-IHS Towers deal
The acquisition is expected to deliver Revenue and Adjusted EBITDA of approximately US$38mn and US$36mn, respectively, in the first full year following closing (based on a current exchange rate). The purchase price of the transaction, on a cash and debt free basis, is US$315mn.
SP5’s sites are located in 25 of Brazil’s 27 states, so the transaction will play a key part in IHS Towers’ inorganic growth strategy in Latin America as they seek to become the leading emerging market telecommunications infrastructure provider in the region. SP5 will be integrated into IHS Towers’ existing Brazilian business with no employees transferring to IHS Towers under the acquisition.
Darwish added “The acquisition of GTS’ SP5 portfolio will be our fifth transaction since we entered the region two years ago and is a testament to our continued commitment to serving the connectivity demands of Latin America.”
Jimmy Eisenstein, GTS Chairman and CEO, said “The sale of our SP5 portfolio represents the culmination of our strategy to create an important infrastructure business focusing on historically under-served regions of Brazil. Since our acquisition, our team has driven strong organic revenue growth, proving the critical role of SP5 to the market and resulting in an excellent return for our investors.”
The deal seriously reduces Grupo Torresur’s presence in Brazil while bolstering IHS Towers’ global emerging market stature. IHS Towers has more than 38,000 towers pro forma across its 11 markets, including Brazil, Cameroon, Colombia, Côte d’Ivoire, Egypt, Kuwait, Nigeria, Peru, Rwanda, South Africa and Zambia.
What’s in the future for Brazil
Brazil, already has a well developed towerco market with 90% of sites owned by towercos,has been through a phase of consolidation with assets passing to long-term towercos seeking acquisitions. Brazil's four mobile operators, Vivo (Telefónica), Claro (América Móvil ), TIM, and Oi are being reduced to three, with the exit of Oi following financial difficulties. There are also smaller MNOs Algar Telecom, Sercomtel, SKY, Surf as well as various ISPs, making for a varied market for tenants.
In 2019 Grupo Torresur sold 1,313 towers to SBA Communications. Since then Highline do Brasil has been acquired by Digital Colony. Telefonica’s towers have transferred to American Tower in its Telxius acquisition. Highline has signed deals to acquire Phoenix Towers do Brazil as well as Oi’s old assets. And that is not to mention IHS Towers’ many transactions.
However, after a fairly lengthy process that seemed to be culminating in a successful sale, Oi may be blocked from selling itself to the consortium formed by rival operators Claro, Vivo and TIM. Brazil’s competition regulator is considering intervening in the deal. This disruption was the last thing Brazil’s mobile sector needed as it was hoping to rebound and make use of newly acquired 5G spectrum.
Brazil’s long awaited 5G spectrum auction took place in November 2021, when TIM, Vivo and Claro all won big in the 3.5GHz bandwidth, but it was the award of spectrum to six newcomers which made for the really interesting headlines. Amongst the new spectrum were ISPs as well as Winity II, an infrastructure firm backed by Patria Investments. Winity II secured a nationwide block in the 700MHz range but is yet to declare its plans for the spectrum.
Latin America’s largest mobile market has attracted several towercos, with IHS Towers just the latest enthusiastic participant. American Tower has the largest portfolio in the country having completed deals with Telefónica (acquiring towers directly whilst also acquiring Telxius’ tower business), TIM and Nextel (Nextel having been acquired by América Móvil).
SBA has a strong footprint in the country having acquired towers from Oi as well as sites from other independent players. DigitalBridge-backed Highline has been steadily growing its presence in the market, acquiring Phoenix Tower do Brasil and Oi’s remaining tower assets in the past year or so. Grupo Torresur is down to its last 100s of towers in Brazil, and will be looking for a final exit of a position which once numbered 1,000s of towers.
In 2021, América Móvil announced that its shareholders had approved the spin-off of its Latin American tower portfolio into a new 36,000 site towerco, Sitios Latinoamérica. A third of those towers are in Brazil where it owns 12,539 sites meaning Sitios Latinoamérica will become a major player in the Brazilian towerco landscape when it becomes operational in 2022. If Sitios Latinoamérica demonstrates real independence and a proactive commercial strategy it could change the dynamics of a Brazilian market that has recently been characterised by consolidation.
With 5G auctions complete towercos are now positioning themselves as more holistic providers of passive telecom tower infrastructure. The high frequencies and higher capacity of future networks will require densification that will force towercos to move away from providing traditional macro sites and rooftops. This is why towercos like IHS Towers are investing in fibre. Not only does it provide diversification in a growing market, but it lays the foundations for small cell rollouts or connecting smart poles and street furniture. TowerXchange expects to see many more announcements out of Brazil before the year is out.
