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The long shadow of rising inflation and the actions taken to tackle it continues to challenge towercos active in Africa. Increasing cost of capital, fluctuating interest rates and the search for US$ in several markets have created challenging operating and financial conditions.
Due to increasing cost of capital, towerco strategy is shifting away from M&A to focus on organic growth and increasing tenancy ratios. In the latest Q1 financial results and 2024 strategies of Africa’s public towercos Helios Towers highlighted its ambition to reach a prevailing tenancy ratio of 2.2x by 2026 as many of its recently acquired towers remain underutilised single-tenant sites. IHS Towers is also aiming to grow co-locations, having extended an agreement with Airtel Nigeria for and additional 2,500 tenancies. American Tower saw substantially higher organic tenant billing growth in Africa than in other markets, 11-12% compared to their next-highest region of 5-6% in Europe.
The biggest news this quarter comes from Nigeria, with IHS Towers renewing its lease on 13,500 sites with MTN until 2032. It’s much-needed good news for Africa’s largest towerco, which has been exposed to Nigeria’s volatile macroeconomic environment. New financial terms include a reduction of the US$-indexed component of the lease agreement, making these majority naira linked, but does include a CPI escalator component to offset this. The terms also remove technology-based pricing, allowing payments for new upgrades based on tower space and power.
A new component has also been introduced indexed to the cost of providing diesel power to act as a hedge against diesel prices and FX fluctuations. The renegotiated terms aim to mitigate macro risks affecting MTN Nigeria as well as support margin recovery and resolution of IHS Towers’ negative equity position.
IHS Towers, ATC Nigeria and MTN Nigeria have also agreed to a revision and reallocation of the 2,500 contracted sites MTN did not renew with IHS Towers last year. ATC Nigeria will host MTN on 2,100 new sites while IHS will retain, 1,430 co-locations. This includes an additional 1,000 new sites to be rolled out over the next few years, allocated between both towercos.
It’s not clear exactly how many of the IHS Towers are retained from the original 2,500 versus what has been committed in new build. TowerXchange understands that discussions between ATC Nigeria and MTN had stalled post-announcement. ATC Nigeria had already begun the process of design, site acquisition and surveying in preparation for the then-new tenancies, but most of this investment is expected to be recuperated.
However, IHS Towers continues its strategic review to assess how to save it’s declining share price, including rumours of a potential sale of it’s Zambian and Rwandan opcos. There are also speculations of a sale some of it’s Latin American and Middle East operations.
These last two quarters have also seen an increase in capital raising, with DFI’s such as the IFC, Proparco, British International Investment (BII) and European Investment Bank (EIB) providing US$100s of millions in financing to towercos and MNOs for new infrastructure rollout. Helios Towers financed an US$80 million commitment from BII as part of the towercos US$850mn public bond offering, and the same DFI also financed US$30mn to TowerCo of Africa in Tanzania.
Private capital has also seen an uptake in activity, with Actis acquiring a 70% stake in South African towerco Swiftnet from Telkom for US$355mn, bringing a fresh wave of US$ investment into South Africa’s tower sector. In Rwanda, private equity form Admaius Capital Partners acquired a majority stake in local towerco TRES Infrastructure to boost new site rollouts. Fresh capital into the sector will help upgrade equipment, stimulate new organic growth and structural upgrades to improve colocations over the next year.
These economic woes have had equally major impacts on Africa’s middle market tower market, with last year seeing few new builds and 2024 seeing only uneven recovery by geography. However, organic growth appears to be picking up again.
While tower builds for densification and technology rollout have been low overall, one area of growth has been in the ultra-rural space. AMN has been the most active, deploying over 4,000 network-as-a-service sites, with other rural players such as Vanu, NuRAN and iSAT Africa working mostly with MTN and Orange to support their geographic coverage obligations and reduce their capex and opex burdens. Managed service provider I-eng has also started to deploy their own NaaS sites in Nigeria, with over 40 currently live, for MTN and Airtel.
Energy continues to be the leading operational challenge for the industry as further grid decline pushes increasing demand for on-site power generation, while ESG commitments from major MNOs such as Orange, Vodacom and MTN have spurred demand for clean energy. In South Africa, which experienced rapid grid decline and loadshedding spikes in 2023, power-as-a-service (PaaS) is starting to become a staple for the sector. American Tower and SBA South Africa have both launched PaaS and smaller towercos are now installing power equipment across their networks. However, this is placing a huge burden on the SME market as energy management is capex-heavy and requires new power expertise.
Orange had been in a process of strategic review for the last year, assessing the viability of a tower carve-out across some or all its 14 MEA markets. While tax and regulatory issues have meant a large-scale carve-out was agreed to be inefficient, there have been some recent discussions around a possible carve-out or joint venture in some select markets.
Safaricom is also exploring M&A in both Kenya and Ethiopia, but in quite different ways. In Kenya, Safaricom wants to retain ownership of its towers, and has been looking at a carve-out, although like Orange faces complications with tax fees. A similar strategy is being taken on the energy-front, looking at an ESCO financing deal to offload capex and maintenance but retaining ownership of equipment. In Ethiopia, Safaricom has deployed over 3,000 towers since launching in 2022 but has found rollout capex and operations extremely burdensome. Ethiopia has yet to license towercos, but Safaricom is lobbying the government in the hopes to offload both tower and power management in a SLB and power-as-a-service deal.
Figures included in the report:
1: Breakdown of ownership of Africa’s telecom towers
2: Estimated tower counts for selected countries in SSA
3: Tower ownership by Africa’s three largest independent towercos
4: TowerXchange SSA towerco activity and tower transaction heatmap
5a: Multi-country towerco footprints in sub-Saharan Africa
5b: Single-country towercos
6: ESCO footprint in sub-Saharan Africa
7: SIMs per tower in Africa
Figure 8: Angola – estimated tower count
Figure 9: Burkino Faso – estimated tower count
Figure 10: Cameroon – estimated tower count
Figure 11: Chad - estimated tower count
Figure 12: Congo Brazzaville – estimated tower count
Figure 13: Cote d’Ivoire – estimated tower count
Figure 14: DRC – estimated tower count
Figure 15: Ethiopia - estimated tower count
Figure 16: Gabon – estimated tower count
Figure 17: Ghana – estimated tower count
Figure 18: Kenya – estimated tower count
Figure 19: Madagascar – estimated tower count
Figure 20: Malawi’s slow mobile broadband (Kbps)
Figure 21: Mozambique – estimated tower count
Figure 22: Nigeria – estimated tower count
Figure 23: Senegal – estimated tower count
Figure 24: South Africa – estimated tower count
Figure 25: Tanzania – estimated tower count
Figure 26: Uganda – estimated tower count
Figure 27: Zambia – estimated tower count
Figure 28: Zimbabwe – estimated tower count
Figure 29: Africa’s biggest tower transactions to date
