Airtel’s African tower sale is not a portfolio transaction

Africa’s #2 operator will consider breaking apart their portfolio of 15,000 towers country by country

TowerXchange has confirmed that Airtel is seeking third party buyers for an estimated 15,000 towers, representing all their towers in the 17 African countries in which Airtel operates. The transaction may not be a portfolio deal as Airtel is entertaining bids for towers in individual countries.

The move is believed to be motivated by Airtel’s desire to reduce debts of just under US$10bn, which is almost exactly the amount Airtel paid (US$10.7bn) to acquire Zain’s operations in Africa. Reports have attached a US$1.8bn price tag to Airtel’s towers, but this has not been confirmed by the operator.

The potential sale of Airtel’s towers follows previous rumours that the operator would set up it’s own towerco, indeed Airtel registered Africa Towers subsidiaries in all 17 countries. This process may mean that some of the legal and due diligence work required to separate infrastructure assets, the complexity of which often delays tower transactions, is already under way.

Bharti Airtel’s CFO recently quashed rumours of a potential sale of Airtel’s African towers to Bharti Infratel, seemingly leaving the way clear for Africa’s ‘Big Four’ towercos (American Tower, Eaton Towers, Helios Towers Africa and IHS), or a well-financed new market entrant, to acquire the tranches of Airtel’s towers in selected markets.

Portfolio sale approach unsuccessful in the past

Airtel may have learned from Etisalat’s experience. Towards the end of 2012, Etisalat sought bidders for their entire portfolio of African towers. The complexity of the deal, particularly when it came to engaging local shareholders, stalled the process.

In a recent interview with TowerXchange, Etisalat’s Head of M&A Tim Knowles said “Etisalat tried to do pan-African tower deal, but it didn’t work out, and it made us late to market. Now we take a more opportunistic, country by country approach, considering tower transactions if it makes sense for the local OpCo.”

Taking an opportunistic, country by country approach has enabled MTN, Vodacom and Orange to sell to, or partner with, towercos in other African countries, and it seems Airtel are now set to follow a similar strategy.

Changing the shape of the African tower industry

If all the Airtel towers were sold, it would almost double the current size of the African independent tower industry. Since the inception of the independent towerco industry in Africa, 15,800 towers have been sold by operators to towercos. A further 7,200 towers have been transferred on a managed services basis – they are managed and marketed but not owned by towercos – according to TowerXchange’s tower count. The 23,000 towers currently owned or managed by independent towercos represents around 15% of Africa’s towers.

Transactions will take time

TowerXchange does not forecast any of the Airtel towers to be sold in 2013, in fact it may be Q2 or Q3 2014 before deals start closing. Financial and technical due diligence processes will take time.

We also do not forecast that all 15,000 Airtel towers will necessarily be sold, as some of Airtel’s markets are more attractive to towercos than others, if for no other reason than purely on the basis of scale. It will be interesting to see if Airtel is able to bundle towers in less attractive countries with assets in towercos’ priority countries, and whether Airtel will have any recourse should towers be left unsold in unattractive markets.

Raising capital

As well as Airtel’s 15,000 towers, TowerXchange’s Tower Transaction Heatmap is tracking up to an additional 15,000 African towers in the pipeline for sale or transfer to towercos, with towers believed to be on the market in Egypt, the Guineas, Mali, Nigeria, Rwanda, Senegal, South Africa, Tanzania and Zambia.

At least one of Africa’s three leading VC-backed towercos is believed to be actively raising capital, and TowerXchange has had an unprecedented volume of visitors from investors to read our exclusive research on emerging market towers in the last month.

Impact on the tower industry supply chain

Transferring many thousands of towers from operator-captive to independent towercos will accelerate the transformation of the passive infrastructure supply chain. An early priority for towercos acquiring Airtel’s towers will be to secure a relationship with a reliable local maintenance contractor, while remote monitoring systems are often an early investment as towercos seek to evaluate the performance of newly acquired assets. Tower transactions tend to unlock pent up maintenance spend, while A&E firms, managed service providers and tower component manufacturers benefit from a wave of tower evaluation and upgrades.

CDC batteries tend to be first stage energy equipment investments, with investments in longer payback innovations such as renewables following 12-18 months after acquisition.

Airtel has towers in the following countries

Burkina Faso, Chad, Congo Brazzaville, Democratic Republic of Congo, Ghana, Gabon, Kenya, Madagascar, Malawi, Niger, Nigeria, Rwanda, Seychelles, Sierra Leone, Tanzania, Uganda and Zambia


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