Country profile: Nigeria

There are four GSM MNOs in Nigeria; market-leader MTN with 40% of the mobile market share, Glo and Airtel competing for second place with around 25%, and 9Mobile with under 10%. Financial issues have led to most of 9mobiles’ networks being inactive, and just 10% of their sites are carrying traffic due to power issues. There are also many LTE-only players and two CDMA operators. Nigeria is Africa’s largest and oldest independent towerco market with towercos building sites in Nigeria since 2006.

IHS Towers is the largest towerco in Nigeria, having acquired the portfolios of Etisalat (now 9mobile) and MTN and consolidating towerco HTN Towers, in addition to buying up sites from Hotspot Network. IHS Towers also operate a fibre business and have deployed 10,000km of cabling.

American Tower entered the market in 2014 after acquiring Airtel’s 4,700 towers and works with both Airtel and MTN.

Pan African Towers has an injection of new capital from new shareholders Development Partners International and Verod Capital. The towerco has been decommissioning sites over the last two years, causing their total count to drop from around 1,000 to 762. 235 sites are inactive and are unlikely to come back online soon, according to the towerco. Another local towerco, Hotspot Networks, is deploying rural sites with some passive + active networkas- a-service as well as last-mile fibre, and operates a small number of small cells.

Eastcastle Infrastructure entered Nigeria in 2020 and has deployed around 200 towers, but due to the current macro environment has been focusing capex for new builds into the DRC instead. However, Eastcastle is bidding to win new site builds from MTN.

With MNO network capex being stretched, there has been an increasing reliance on network-as-a-service to take more of the investment burden. AMN entered the market in 2020 and has deployed over 1,000 NaaS sites, and Hotspot Networks signed a US$4mn grant from the USCBA to connect 2,000 villages over the next 3 years working with Parallel Wireless to deliver OpenRAN. Managed Service Provider ieng Group has also signed NaaS agreements with MTN and Airtel and has 40 sites live.

Despite strong demographics and a large and fastgrowing population, Nigeria has faced major economic headwinds, particularly over 2023. From May 2023 the Naira-US$ exchange rate plunged from 900 to nearly 1,600, a nearly 250% devaluation. This was driven by the Government’s attempts to unify the exchange rate, control inflation and reduce costs by removing petrol subsidies. While all seen as positive trends in the long-term, the lack of supporting regulatory and policy frameworks led to rapid devaluation that exceeded economists’ expectations. The Naira has stabilised at around 1,500 – 1,600 for now with fresh US$ into the central bank from World Bank loans and the return of oil exports, with some speculation that the economy may stabilise by the end of the year.

This has had a huge impact on the industry, as expenditure and earnings are largely in US$, pushing up costs across the board. IHS Towers reported losses of nearly US$2bn in 2023 and an overall 3.1% decline.

Energy price inflation also drove up costs of power, but CPI escalators and FX resets helped protect the industry with financial results showing significant gains in organic revenue growth. However, these costs have all been passed on to the MNO who is facing pressure from two sides; market competition and shrinking customer revenues have deflated earnings while operational costs are higher than ever.

Energy has been a major challenge for the industry, with 40-50% of ATC and IHS sites being off-grid and those on-grid facing up to 20 hours of load shedding per day. The national grid doesn’t have the investment to grid connect so the emphasis is on the industry to provide power themselves, but IHS did only 500 connections in 2023, a fraction of their total sites.

Fuel theft is also a huge challenge with 70% of lost diesel coming via transit, making up around 12% of the total. Both IHS and American Tower are exploring any technologies and solutions that can help mitigate this, including alternative fuels and efficiency-enhancing software, removing diesel generators and utilising grid connections where possible. Solar and wind prove effective, but variations in weather and climate make it hard to apply across all sites universally.

Nigeria has become Africa’s largest ESCO market, owing to supportive independent power producer regulation and the challenges of managing power. Pan African Tower works with several ESCOs, and Hotspot Network has signed an ESCO agreement with Solarkiosk under a joint venture to provide solar energy to Hotspot’s towers. IHS Towers has embraced ESCOs to try to reduce its capex burden, working with WATT Renewables, Clear Blue Technologies, IPT Powertech, Energy Vision and Biswal.

MTN Nigeria has been awarded a license to build gridscale power infrastructure in Lagos, as part of the Nigerian Energy Regulatory Commissions (NERC) permit issuing to minigrid developers to provide independent power production for private customers. The four plants generating nearly 16MW of energy will enable MTN Nigeria to provide capacity for 100s of sites and reduce reliance on the state power company NEPA.

After a long tumultuous period, IHS Towers has renewed its lease on 13,500 sites with MTN until 2032 with new financial terms that reduce the USD-indexed component of the leases linked to a discounted US consumer price index (CPI), making the leases majority naira-linked, as well as set a cap for the naira CPI escalator component. 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 colocations. 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.