This is according to “people with knowledge of the matter” as reported by various media sources, who have been kept anonymous.
The towerco plans to gauge interest from potential buyers of its operations in both markets, with the proceedings to be used to alleviate some of the company’s outstanding debt. This also follows on the heels of IHS Towers announcing layoffs of over 100 employees.
IHS Towers has been through a turbulent journey in 2023. In June, Nigeria's Central Bank unified the foreign exchange market which led to a 60% drop in the naira and FX volatility ever since. Diesel prices skyrocketed, and with 50% of IHS Towers’ largest portfolio off-grid this placed immense pressure on opex.
But the firm has also had some positive news to aid recovery. After a long-dispute period with their largest customer and shareholder MTN Group led to the loss of a 2,500-site tenancy contract last year, the parties recently announced a renewal of existing tenancies including a winback of some lost sites to American Tower. Included in the contract was a new indexed diesel power component to hedge against rising prices.
IHS Towers also expanded their relationship with another major customer Airtel Nigeria, extending 6,000 tenancies and adding an additional 3,500 new ones.
These, however, did not offset the staggering US$1.9bn loss in 2023 and an all-time low share price that hit a record low of just US$2.40 in March this year, and currently sitting at around US$3.60; a 78.4% overall decline. With a global portfolio of 40,392 towers and market cap of US$1.2bn, this puts per-tower valuation at just under US$30,000.
Massively undervalued, Group CEO Sam Darwish announced a strategic review in March. Following this, rumours of several market portfolios being up for sale have surfaced including Brazil and Kuwait, and now Rwanda and Zambia. Their small Peruvian portfolio was quickly sold to SBA Communications in February.
Source: IHS Towers Q224 investor presentation global footprint
In Africa, Rwanda and Zambia make up a small portion of IHS Towers’ African portfolio, with the bulk of their 30,462 towers in Nigeria (16,345); the company operates 1,443 sites in Rwanda and 1,878 in Zambia – 9% of their total African towers. These markets also have very different operating and commercial environments.
Rwanda has seen rapid acceleration of technology growth, particularly in the LTE space where subscriber count has grown quickly due to national LTE-coverage achieved in 2018. Market MNOs Airtel and MTN Rwanda are both in steep competition, with the latter leading at 62% and the former 38.1%. At 96% 4G population and ongoing planning for 5G launch, Rwanda is poised to see strong growth in mobile services despite its small geography and population.
This has reflected IHS Towers’ opportunities in the market, having doubled their portfolio from 714 acquired sites from MTN in 2013 through organic growth, increasing stock at around 10% year-on-year.
Adversely, Zambia is a geographically large and sparsely populated country where tower strategy is centered on capacity coverage in urban areas and rural expansion for geographic coverage.
The country is still reeling from a devastating drought earlier this year, which drained the water levels of the country’s water sources and dramatically reduced Zambia’s hydroelectric power generation capability which the grid relied on. 12-hour loadshedding has hit the tower sector hard, on top of the worsening macroeconomic environment.
Africa has seen a dip in M&A activity over the last two years, as high interest rates and disparities over tower valuations have made it difficult for prospective buyers and sellers to reach agreement. Both Rwanda and Zambia have local towercos, TRES Infrastructure and Infratel Zambia respectively, but regulators and operators have shown concern towards towerco market consolidation in the past, especially if this leaves a monopoly in the market.
A quick assessment of the major players in the region also narrows down options. Helios Towers announced a step away from expansion to focus on lease up, deleveraging and free cash-flow. American Tower’s recent India exit suggests the firm might be assessing a new big play far from the frontier markets of Africa’s tier-2 markets. SBA Communications continues to assess acquisition opportunities but has a very strict selection criteria that neither market is likely to yield much excitement for.
One towerco that has been moving against the flow of the market is TowerCo of Africa, which has expanded into three new markets since 2020; Uganda, Tanzania and DRC. Backed by Pan-African conglomerate AXIAN Group, it is one of the few towercos with an appetite for expansion into frontier markets.
Another more bullish group are the infrastructure private equity funds, who have been making recent plays in Africa’s digital infrastructure sector. Admaius Partners recently acquired a majority stake in local Rwandan towerco TRES Infrastructure, and Actis wholly acquired Telkom’s tower unit Swiftnet in South Africa this year.
