Africa’s multi-billion dollar wave of tower sales gains pace

MTN may be joining the sale in Nigeria, update on the Airtel transaction

TowerXchange is tracking almost 40,000 African towers at various stages of progression toward sale or outsourcing to independent towercos. With a pipeline of over US$3bn worth of assets coming to market, and with the independent tower model increasingly proven in Africa, a new class of investor that only wants to write substantial cheques is being attracted to the market.

Nigerian mobile operator market share, March 2013

 nigeria-market-share-2013

18,000+ towers for sale in Nigeria

This unprecedented wave of African tower opportunities is headlined by the sale of 15,000 towers across 15 countries by Airtel, with Reuters reporting the sale is most advanced in Nigeria, where TowerXchange sources also suggest MTN Nigeria’s coveted portfolio of over 10,000 towers may be back on the block. With Etisalat having hired Standard Bank to secure a buyer for their Nigerian towers too, upwards of 80% of Nigeria’s towers may be owned and operated by independent towercos by the end of 2014 (currently around 13% of Nigeria’s towers are independently owned).

Nigeria may be the crown jewel of the African telecom sector in terms of profitability, yet it’s a pretty rough diamond when one considers the power and security challenges of operating a Nigerian tower network. At the recent GSMA Green Power for Mobile Working Group in Lagos, fuel security was a hot topic, and it was reported that an average of five hours of power was available per day at Nigerian cell sites, with only 60% of that usable due to poor quality.

Last year, the GSMA counted 12,560 of Nigeria’s 24,242 towers to be off grid, with another 10,645 on an unreliable grid. Only 2-3% of Nigerian cell sites run 100% green power, although around 40% are battery hybrids. The GSMA has identified 10,890 sites than have a business case to be converted to hybrid or renewable power, which would require US$1bn of investment by 2015.

There’s plenty of room for growth in Nigeria, which already boasts over 100mn subscribers, double digit growth year on year, 68.6% mobile penetration (NCC, March 2013) and coverage greater than 80%. However, QoS problems are common, and Nigeria is thought to need another 50,000+ towers to optimise coverage and capacity.

For more contextual information on the Nigerian tower market, check out the Nigeria case study in issue 4 of the TowerXchange Journal.

Airtel Africa towers to be carved up among IHS, Helios and Eaton

Airtel are still not able to comment ‘on the record’ about their African tower sale, except to reiterate that sharing infrastructure is a core strategy for the group, is seen as a critical means of lowering costs in emerging markets, and has delivered operational efficiency in India.

TowerXchange sources suggest that Airtel have accepted that it’s not feasible to sell all their African towers in one tranche. IHS, Helios and Eaton are each believed to have their own list of Airtel tower portfolios they want to acquire, while TMT Finance report that American Tower has dropped any interest in the Airtel Africa portfolio.

Airtel’s recent Q3 results revealed a fall in net profit from 10.11bn rupees last year to 2.84bn rupees (around US$53mn). Financing costs rose 69% to 13.32bn rupees. Relieving the cost of debts accumulated in the original Zain acquisition is believed to be a strong motivator for Airtel’s African tower sale. There were signs of improvement for Airtel Africa, with a 21% increase in it’s customer base and mobile data revenues up 80% (compared to 70% in India).

airtel-africa-map

Even more Africa towers on the market

As if Nigeria and Airtel weren’t enough to keep the analysts, advisors and lawyers busy, there are still over 5,000 Orange OpCo towers coming to market in Egypt, Senegal, Mali, Guinea Conakry and Guinea Bissau, and rumours of potential further transactions involving Millicom, Zantel and out of DRC and Burundi.

Sonatel’s 3,000 tower sale reportedly launched

As reported in TowerXchange for several months, Orange has an active mandate to outsource Sonatel’s towers across Senegal (approximately 1,600 towers), Mali (1,000), Guinea (400) and Guinea-Bissau (85). TMT Finance reports that a formal process has started under the guidance of Lazard, who helped Orange sell their towers in Uganda last year, and who are also reportedly advising on MobiNil’s sale of 2,500 towers in Egypt.

$100mn upgrade for Helios Towers DRC

Helios Towers Africa has secured a US$100mn loan facility for the operation and upgrade, reactivation and expansion of their tower network in the DRC. The US$100mn loan facility consists of a commercial loan arranged by Standard Bank, development finance from the German Investment and Development Corporation and the Belgian Investment Company for Developing Countries, and a guarantee from the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

Helios Towers Africa is the sole independent towerco in the DRC, having acquired 729 towers from Tigo in 2010 paying US$45mn, with Millicom retaining 40% equity. Helios has achieved a very healthy tenancy ratio in the DRC, and securing this loan further proves the robustness of their business. However, conflict in the East has contributed to a small number of Helios Towers DRC’s sites being offline, while the limited extent and poor quality of grid power makes for a challenging operating model, compounded by poor transport infrastructure which makes the delivered cost of equipment significantly higher than the landed cost. Doubtless this injection of debt finance will help.

TowerXchange forecasts that further tower transactions will occur in the DRC in the short to medium term, with Airtel’s network, believed to be the most pervasive in DRC, up for grabs, and rumours suggesting Orange may be interested in outsourcing their towers in DRC.

IHS to delist from the Nigerian stock exchange

TMT Finance reports that IHS shareholders have voted to take the company private, and will pay US$0.03 per share to buy out stockholders. Only a small proportion of the equity in IHS was believed to be part of IHS’ initial public offering, and the decision to take the company private is unlikely to have any impact on IHS’ current round of capital raising, with reports linking IHS with Macquarie-backed African Infrastructure Investment Managers (AIIM).

Vodafone Ghana to add over 400 new sites, and who wants to buy an Expresso?

Agence Ecofin reports that Vodafone Ghana are investing US$22.9mn in a massive extension operation, deploying over 400 new sites to improve coverage and capacity. The report quotes CTO Patricia Obo-Nai as saying “Over the past years, we have invested more than USD700 million in the expansion of our sites, (which have) increased from 300 in 2009 to 2000 across the country.”

Vodafone Ghana outsourced the management of 750 towers to Eaton Towers in 2010 under an operational lease deal structure.

Meanwhile, we’re reading that the on-off sale for an estimated US$150mn of CDMA operator Expresso Telecom, Ghana’s sixth ranked operator, to Jospong Group is currently off. Expresso’s current owners Sudatel are believed to be considering selling their telecoms assets in Ghana, Guinea, Mauritania, Senegal and South Sudan.

Viettel keen on Burkina Faso, Burundi and Tanzania

Vietnamese military-run Viettel are in the midst of an acquisition and expansion drive into Africa. Despite delays to the launch of their Cameroon operation until mid-2014, Viettel has acquired the sixth mobile license in Burundi, and is pressing ahead with expansion into Burkina Faso and Tanzania. Viettel are believed to be the sole bidder for the fourth license in Burkina Faso, where they would join Onatel, Telecel Faso and Airtel. Mobile penetration in Burkina Faso is believed to be just over 60%. Viettel are also reported to have applied for a license in the crowded Tanzanian market. Helios Towers operates almost 2,500 towers in Tanzania having acquired the infrastructure assets of Tigo and Vodacom.

Frontier Tower Solutions closes on tower deal with Niel Telecom

Our friends at Frontier Tower Solutions (FTS) are believed to be closing in on their first African deal, acquiring towers from Niel Telecom in Burundi and the Central African Republic. FTS have built and manage over 1,200 towers in Iraq and Afghanistan, where a further deal has also been suggested, and have activity pending in Bolivia.

Telkom Mobile denies tower deal imminent, MTN extends LTE rollout

Telkom denied unsourced media speculation that it had received a bid for the sale of 1,600 mobile towers. “Telkom would like to correct statements that have been widely published regarding the sale of its tower infrastructure,” the company said in a statement. “The company has not received any proposal from a Southeast Asian company for the sale of its mobile towers business or an investment of $3bn.”

Telkom Mobile are believed to own over 6,000 shareable structures which, in the highly attractive South African tower market, could potentially be divested for between half a billion and a billion dollars, depending on the structure of any tower deal.

Meanwhile MTN announced that LTE has been extended to 3mn South Africans, with 1,000 LTE-enabled BTS now deployed.

Updated independent tower counts and transaction history for Africa

TowerCount-Feb20141

Estimated number of towers transferred, purchase price and deal structure:

2010: Millicom/Tigo deal with HTA in Ghana

Estimated number of towers: 750

Publicly stated purchase price: $54m for 60%

Deal structure: Joint venture

2010: Vodafone deal with Eaton in Ghana

Estimated number of towers: 750

Publicly stated purchase price: N/A

Deal structure: Operational lease

2010: Cell C deal with American Tower in South Africa

Estimated number of towers: 1,400 (Cell C deal included 1,400 existing towers plus additional towers under construction)

Publicly stated purchase price: $430m

Deal structure: Sale and leaseback

2010: MTN deal with American Tower in Ghana

Estimated number of towers: 1,876

Publicly stated purchase price: $218.5m for 51% 

Deal structure: Joint venture

2010: Starcomms deal with SWAP in Nigeria

Estimated number of towers: 407

Publicly stated purchase price: $81m 

Deal structure: Sale and leaseback

2010: Millicom/Tigo deal with HTA in DRC

Estimated number of towers: 729

Publicly stated purchase price: $45m for 60% 

Deal structure: Joint venture

2011: Millicom/Tigo deal with HTA in Tanzania

Estimated number of towers: 1,020

Publicly stated purchase price: $80m for 60%  (Millicom/Tigo’s stake in Helios Towers Tanzania reduced to 24.5% after Helios acquired towers from Vodacom Tanzania in 2013)

Deal structure: Joint venture

2011: MTN deal with American Tower in Uganda

Estimated number of towers: 1,000

Publicly stated purchase price: $89m for 51%

Deal structure: Joint venture

2012: Orange deal with Eaton in Uganda

Estimated number of towers: 300

Publicly stated purchase price: Unknown

Deal structure: Sale and leaseback

2012: Warid deal with Eaton in Uganda

Estimated number of towers: 400

Publicly stated purchase price: Unknown

Deal structure: Sale and leaseback

2012: MTN deal with IHS is Cameroon

Estimated number of towers: 827

Publicly stated purchase price: $143m

Deal structure: Sale and leaseback

2012: MTN deal with IHS in Cote d’Ivoire

Estimated number of towers: 931

Publicly stated purchase price: $141m

Deal structure: Sale and leaseback

2013: Orange deal with IHS in Cameroon and Cote d’Ivoire

Estimated number of towers: 2,000+

Publicly stated purchase price: Unknown

Deal structure: Managed services

2013: Vodacom deal with HTA in Tanzania

Estimated number of towers: 1,149

Publicly stated purchase price: “$50-75m for 75.5%”

Deal structure: Joint venture

2013: MTN deal with IHS in Rwanda and Zambia

Estimated number of towers: 1,128

Publicly stated purchase price: Unknown

Deal structure: Sale and leaseback

TowerXchange tower transaction heatmap – current state

africa-heatmap-feb2014 

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