Country Profile: South Africa

There are five MNOs in the South African market: traditional operators MTN, Vodacom and Telkom. Plus 4G/5G-oriented Rain and former nationwide carrier Cell C, both are following unconventional strategies. Cell C is shutting down its network and switching to a roaming agreement with MTN, and it’s license has been recalled by parent company Blue Label.

Vodacom has carved-out its tower portfolio into Africa’s newest towerco Mast Services. The transaction was originally for 9,500 sites but ended up being 8,827 due to several factors, namely several structured transactions that were negotiated with 3rd parties which did not have long term land leases. With some decommissioning that has taken place since, the total site count sits at around 8,500.

This makes South Africa a very crowded towerco market. IHS joined in 2022 after acquiring MTNs 5,709 towers, SBA Communications in 2021 after acquiring Atlas Towers’ South Africa portfolio, Helios Towers in 2019 in a joint-venture with local fibreco Vulatel.

American Tower has been in the country for over a decade. In addition to the big regional towercos, there are over 30 small players, making the build-to-suit market extremely competitive.

In 2023 the national grid rapidly declined leading to 10-12 hours of load-shedding per day and energy price spikes. This quickly shifted MNO capex from rollout to resiliency, with new builds coming to a hear-halt and towercos instead pushed to launch energy solutions. Part of the IHS / MTN SLB included an ESCO contract on all 13,000 sites MTN was a tenant on, which became untenable and has since been removed from the lease agreement. SBA and ATC both have launched power-a-service solutions, and Mast is developing a power service offering which is being launched at scale from next year.

The grid has since stabilised, with the government licensing independent power producers and both MTN and Vodacom signing private energy deals, helping to alleviate grid burdens. While slow, new builds are starting to pick up again. Vodacom recently pledged ZAR800mn (US$44.4mn) deploy 130 new sites in KwaZulu-Natal.

Small towercos have been most impacted by this, as they lack the scale and access to capital required to provide power-as-a-service. However, this may be an opportunity for the big towercos to consolidate some of the market and absorb the build-to-suit players who had pulled a lot of new build business away from them.

Telkom is in negotiations for the sale of its towerco unit Swiftnet, the buyer understood to be a consortium of equity investors led by a reputable private equity firm, but it seems negotiations have temporarily stalled. The last two years saw large investments from MNOs into 5G spectrum auctions, with the telecoms regulator ICASA raising US$967mn in it’s latest bid and all MNOs winning some spectrum (Vodacom and MTN being the largest spenders).

However, in response to the energy crisis, MNOs have had to backtrack on their 5G capex commitments to prioritize shoring up their networks. But despite this short-term headwind, operators will need to capitalise on their large investments, and new regulation allowing for the provision of private energy companies will help alleviate loadshedding over the medium-term.

Telkom has sold its business unit Swiftnet to global infrastructure investor Actis (70%) alongside Royal Bafokeng Holdings as their Black Economic Empowerment partner (30%) for ZAR6.75bn (US$355mn). There is some discrepancy over tower counts, as Actis report buying 4,000 while Telkom confirmed Swiftnet’s portfolio as 6,000 with 3,000 of these being multi-tenant with a tenancy ratio of just under 1.5x. Telkom also report 70% EBITDA earning from the towerco, unusually high for the market.

The senior management team for Swiftnet will remain mostly the same, and little is expected to change on the ground, but fresh capital is welcome in South Africa to help drive new site deployment and lease up for MNO 4G and 5G coverage. Swiftnet will also be taking over power on some select sites but isn’t rolling out power-as-a-service across the entire network.