Inflation rising. Debt costs increasing. Markets moving unexpectedly. Must be 2025. MENA has faced political uncertainty and shifting investor confidence for many years, and towercos have shaped their financing and investment strategies to accommodate this volatile region. Beyond financing, attendees at TowerXchange Meetup MENA also explored emerging opportunities in fibre, small cells, and artificial intelligence (AI).
Adapting to a shifting macro environment
One of the key themes of the discussion was the difficult macroeconomic environment, which has placed pressure on businesses globally. Ada Ogbunude, TMT Lead MEPA at the International Finance Corporation (IFC), highlighted the extent of the challenge, stating, "The macro picture is terrible. Depreciation is a significant issue, particularly in emerging markets." Towercos, however, are showing resilience by finding innovative ways to respond to these pressures.
"Tower companies are being creative in reducing costs and expanding their margins," Ogbunude explained. "They are also increasing their earnings potential by tapping into sustainability-linked financing, which opens up new capital sources." This shift toward ESG (Environmental, Social, and Governance)-linked debt markets has given towercos access to more favourable financing terms, helping them offset some of the economic strain.
In line with this, major towercos such as American Tower and IHS Towers have been reallocating capital away from non-core markets like Mexico, Poland, and Kuwait, instead focusing on regions with greater growth potential. These moves, alongside selective decommissioning of towers, are part of a broader effort to recycle capital and fuel future growth.
Sovereign wealth funds and digital infrastructure: a new frontier
Mohammed Abulhasan, Director at the Gulf Investment Corporation (GIC), shed light on how sovereign wealth funds have underwritten the development of towercos in the region. Traditionally, sovereign wealth funds in the Gulf Cooperation Council (GCC) region have focused on acquiring assets abroad. However, Abulhasan noted that a transformation is underway.
"Sovereign wealth funds used to focus on acquiring assets outside the region," Abulhasan said. "But over the last five years, tower carve-outs have gained prominence. The sovereign funds have supported these projects, and digital infrastructure funds are now playing a larger role in the region." This change reflects the growing importance of digital infrastructure, as mobile network operators (MNOs) look to monetise their tower assets, creating new opportunities for public-private partnerships in the Middle East.
Navigating M&A and valuation trends
As the market for telecom infrastructure continues to evolve, M&A has become an essential tool for driving growth. However, as Gulfraz Qayyum, Managing Director and Head of Communications Banking, Capital Markets and Advisory at Citi Group, explained, aligning buyer and seller expectations remains a challenge.
"M&A activity in the MENA region is picking up, but many sellers are hesitant about whether it's the right time to sell," Qayyum said. "Towerco valuations have come down, but not all sellers have adjusted to the new reality." While these deals often provide operators with a financing option, Qayyum stressed that the cost of capital remains a key consideration. "It comes down to whether the lease proceeds from selling towers compare favourably with the rates at which operators could borrow."
Despite these hurdles, Qayyum pointed to successful deals in Europe, particularly the Cellnex sales in the Nordics, Ireland, and Austria, as evidence that strong valuations can still be achieved. "We're seeing more tower companies combining to achieve industrial efficiencies," Qayyum added, citing recent mergers like Zain/TASC/Ooredoo and Engro/Deodar as examples of how consolidation can help towercos unlock synergies and improve their operations.
Future opportunities: fibre, small cells, and AI
Looking ahead, the telecom infrastructure sector is poised for further transformation, with fibre, small cells, and AI playing increasingly significant roles. Akshay Grover, Founder of Amadi, emphasised the importance of these technologies, noting that they are no longer merely adjacent to towercos’ core business but are becoming central to the industry’s future growth.
"In the age of AI, fibre, small cells, and Distributed Antenna Systems (DAS) are no longer just adjacent areas—they are becoming part of the core infrastructure," Grover stated. He explained that as AI continues to advance, there will be an increasing need for data processing closer to the end user, presenting new opportunities for towercos. "Data needs to be processed closer to the user, and towercos will play a crucial role in this shift."
AI’s expansion, coupled with the growing demand for data, means that towercos are likely to be at the forefront of this transformation, not only by providing infrastructure but also by ensuring the security and localised processing of data that governments and businesses will increasingly require.
What investors are looking for: partnerships and exit strategies
Investors, meanwhile, are becoming more discerning, focusing on strong partnerships and clear exit strategies. According to Qayyum, the quality of relationships between towercos and MNOs is a key factor in attracting investment. "MNOs prefer to work with towercos that have a widespread footprint and solid contracts in place. It's not just about operational efficiency—it's about having the right partnerships to ensure long-term success."
Exit options are also becoming a priority for investors as consolidation continues in the market. "Exit strategies are an important part of the investment decision-making process," Qayyum said, as M&A activity presents opportunities for investors to capitalise on their investments in towercos.
A dynamic future for towercos
The outlook for towercos in the MENA region is one of both challenge and opportunity. Rising inflation and debt costs pose significant difficulties, but towercos are responding with innovative strategies. These include capital recycling, sustainability-linked financing, and strategic M&A activity, all of which are designed to bolster long-term growth.
As the sector looks towards future opportunities in fibre, small cells, and AI, towercos are positioned to play a critical role in the ongoing digital transformation of telecom infrastructure. Success, however, will require companies to navigate new valuation dynamics, secure strong partnerships, and adapt to the growing demand for data processing closer to the end user. For those able to meet these challenges, the potential rewards are vast.
