Back in March at TowerXchange Meetup MENA 2022, Ooredoo announced that it had an official review of tower strategy across its entire tower portfolio. Now, this review is shaping up to become the next major sale-and leaseback deal that will further transform the tower landscape in MENA.
About the deals
Ooredoo has announced potential plans for a carve-out which it states will “extract optimal value from its infrastructure to create move value for customers and shareholders.” Its portfolio is estimated to consist of 20,000 sites and it has engaged Morgan Stanley to advise on the transactions.
In a recent strategic update from Ooredoo’s annual Capital Markets Day, the operator announced that it would be focusing equity on their strategic pillars which include a value-focused portfolio, strengthening the core business, moving towards a smart-telco model, improving customers’ experience and building a people strategy.
Data centres, towers and fintech were all highlighted as core growth opportunities. Last month, Ooredoo sold their telecom business in Myanmar for US$576mn to Nine Communications after this strategic redirection to focus on its core markets.
A chaotic time for the MENA tower industry: Ooredoo's portfolio sale alongside other towerco activity
Who are Ooredoo
A Qatar-based multinational operator, Ooredoo is 68% owned by the Qatari government with a 10% stake from ADIA and is 22% owned by investors. Ooredoo is one of the oldest and most experienced MNOs in the Gulf, having launched in 1987 in Qatar as Qtel before rebranding in 2013.
Ooredoo has experienced significant growth over the last few years, transforming from a single market operator to a multinational with operations in Iraq, Kuwait, Oman, Qatar, Palestine, Algeria and Tunisia. Ooredoo Indosat, it’s Indonesian opco, recently merged with C K Hutchinson to create Indosat Ooredoo Hutchinson. The company reported revenues of US$8.2bn in 2021 and had a consolidated global customer base of over 121mn, although this number has decreased since exiting Myanmar.
Market footprints:
Qatar
Qatar is Ooredoo’s home market where it is the market leader together with Vodafone. Vodafone is the only other operator and sold its stake to former joint venture partner the Qatar Foundation back in 2018 but continue to operate under the Vodafone name. With only two operators in the market, it is hardly surprising that there is little infrastructure sharing.
Qatar has seen a strong telecom market growth with an increasing urban population, high adoption of 3G,4G and 5G phones as well as an expanding IoT sector. 2G and 3G platforms are expected to close by 2025 with most mobile connections to be on 5G by 2029.
This aligns with the government’s Qatar National Vision 2023 to become a front-runner in 5G rollout, accelerate digital transformation and improve network infrastructure. Both MNOs are heavily investing in 5G networks. There are no currently active towercos in Qatar with the small, consolidated market and lack of operators making towerco entry less attractive.
However, TowerXchange has heard that a likely buyer is ICT Qatar, a local infraco who is acquiring a broad portfolio of ICT infrastructure including fibre and data centres to support the country’s IT transition.
Oman
Ooredoo, formerly known as Nawras, entered Oman in 2004, but rebranded to Ooredoo Oman in 2014, competing with Vodafone Oman and local state-owned Omantel. The country is starting to move towards 5G deployment as Omantel is launching 5G commercial services,Ericsson secured a 5G framework agreement with Ooredoo.
Like other Gulf states the government launched a National Program for Digital Economy last year which includes digitising government processes and services as well as accelerating business digitisation through data centres and cloud technology.
Oman has two towercos in the market. Oman Tower Company is a local towerco founded in 2018 and has been rapidly expanding through new builds, having recently deployed over 1,000 sites for Vodafone Oman. Although Oman Tower Company doesn’t have the volume to acquire Ooredoo’s sites on a regional level, TowerXchange has heard that they are involved in the bidding process for Ooredoo Oman’s sites.
Helios Towers has yet to finalise their acquisition of Omantel’s 2,890 sites as changes in negotiations have slowed down progress. However, TowerXchange understands the deal has largely been completed and is now waiting for a royal degree to approve Helios Towers’ entry as a final ceremonial confirmation.
Kuwait
Ooredoo entered the Kuwaiti market back in 2007 after acquiring Wataniya Telecom, Kuwait's secondMNO, for $3.8bn and rebranded to Ooredoo Kuwait in 2014. Ooredoo’ portfolio is around 1,200 sites which matches Viva’s 1,200 sites and IHS Towers’s 1,424 sites.
Intense price competition between the three MNOs - Ooredoo, stc and Zain - has driven data costs down drastically which has put pressure on revenues. New site rollouts have been tough to justify given declining ARPUs.
Kuwait’s well-developed telecom tower infrastructure is vital to the country’s economic ambitions as it transitions away from a reliance on natural resource extraction towards knowledge-based ICT services. Investments in 5G networks and digital infrastructure are key to supporting growing data traffic and Kuwait now has the fastest 5G download rates in the region.
IHS Kuwait is the only towerco present with 1,446 sites. IHS is a pioneer of infrastructure sharing in the emirate and is currently focused on facilitating 5G rollout working closely with Zain by testing small cell solutions to densify 5G capacity. Towercos have a major role to play in building the digital infrastructure necessary for Kuwait’s digital transition and IHS Kuwait is working closely with the government’s digital vision.
Iraq
Established in 1999, Asiacell was the first MNO in Iraq and was traditionally concentrated in the North although is now the only operator to provide national coverage and has the largest long-term network coverage in Iraq. Zain has a slightly larger mobile share and is about to complete the sale of its towers to TASC.
Ooredoo will be the next to sell in the market as Asiacell finalises a review of their tower portfolio in preparation for a SLB deal while third MNO Korek Telecom is also considering a sale of their towers. Asiacell operates a portfolio of 5,200 sites which is growing at a decent rate as the government has been encouraging infrastructure development after 10-15% of the country's stock was destroyed during the conflict with ISIS.
TASC Towers is taking ownership of Zain’s 4,551 towers in Iraq and is currently building a management team ready to launch operations by Q1 2023. Iraq will be TASC’s second market having taken over Zain’s tower operations in Jordan back in February this year.
Algeria
Ooredoo Algeria first launched in 2004 as Nejma, rebranding in 2013 when they first launched 3G services and followed by launching the country’s first EDGE network in 2004. Ooredoo operate around 5,000 towers in Algeria, just over 25% of the country’s 19,350 sites.
Algeria is a country which is in desperate need of a towerco; infrastructure sharing is less than 2% and the country needs 2-3,000 new sites in the short term to keep up with growing data demands. Although the country is a challenging market to operate in as a foreign company and lacks a regulatory framework for infrastructure sharing, the market has lots of passive infrastructure development opportunities.
Tunisia
Ooredoo Tunisia launched in 2004 as Tunisiana before rebranding in 2014 and currently operate around 2,250 towers in the market. The Tunisian market is shaping up to potentially become one of the most active tower markets in North Africa. Orange currently has a project assessing their passive infrastructure across their MEA markets including over 2,000 towers in Tunisia and Tunisie Telecom are in the process of carving out its 2,250 sites into a separate body by the start of 2023 which could be brought to market by this time next year.
With 8,000 towers and good market coverage from MNOs the Tunisian market is ripe for consolidation, although more infrastructure is needed for black spots and rural areas on the border with Algeria. Ooredoo have also fibreised over 80% of their sites and have started to fibreise radio cells, putting the towers in a strong position for implementing 5G networks.
New telecom regulation is also due next year to encourage site and fibre sharing among MNOs and is a strong sign that regulators would be interested in a towerco infrastructure sharing model.
Who is in the running?
Algeria and Tunisia are the most hotly tipped markets, but interest is ripe across all Ooredoo’s markets. In this section we outline the leading towercos who are in the running to acquire Ooredoo’s sites.
TASC Towers is best positioned from a market perspective to buy Ooredoo’s towers in Iraq, being the only towerco active (or due to be once operations start) in the country. However, Zain is TASC’s largest shareholder and has had issues in proving neutrality from its operator shareholder.
Ooredoo is also likely, as they are in other markets, to ask for ‘schmuck equity’ from any potential buyer. Having Zain and Ooredoo as shareholders may complicate things for TASC as both operators are direct competitors across multiple markets. It seems more likely that a separate towerco will be brought into the market and TowerXchange has had inquiries from local operators into TAWAL’s interest in the Iraqi market.
Although TASC has yet to take over Zain’s 500 towers in Bahrain and potentially sites in Sudan and South Sudan, TowerXchange has heard from the industry that TASC is a popular choice for several Ooredoo portfolios.
TASC Towers continues to be a popular choice as a potential buyer in North Africa too as they continue their expansion across MENA markets. Zain is also absent from the Tunisian market which makes any complications around competitors less of a concern.
However, like in Algeria, Tunisia is another attractive market for African towercos to enter the region. The biggest challenge to any towerco will be the government’s protectionist stance towards foreign companies which could be a barrier to entry for any outside market entrant.
Depending on how Tunisie Telecom’s carve-out develops, we could instead see a local carve-out consolidate the market by following the model of stc and TAWAL in Saudi Arabia.
TAWAL is another popular contender for Ooredoo’s sites. Although only active in Saudi Arabia and imminently starting operations in Pakistan, the Saudi towerco has had an eye on regional expansion for some time.
TowerXchange has had inquiries from Iraqi operators into TAWALs interest in the country which suggests a second towerco might be brought in rather than have TASC acquire both Zain and Ooredoo’ sites. However, the biggest clue for TAWALs interest may come from a recent development by PIF who announced $24bn in investments across Bahrain, Oman, Jordan, Iraq and Sudan in a variety of sectors including telecoms.
PIF has also been active in the Saudi market having put forward an offer for 51% of TAWAL from stc and forming Golden Lattice Investment Holding to oversee Zain KSAs sites. This suggests PIF will look to consolidate the Saudi tower market under TAWAL to form a towerco that can start investing in other regional markets. Bahrain, Oman and Iraq are all markets where Ooredoo is selling, putting TAWALs interests in line with PIF investment markets.
IHS Towers is the only international towerco present in MENA, with operations in Africa and Latin America. IHS’ current presence is small, with 1,445 towers in Kuwait and a BTS contract in Egypt but the Ooredoo sale offers an opportunity to rapidly expand their presence in the region. As the only towerco in Kuwait, a SLB with Ooredoo Kuwait would consolidate their position in the market and further support MNOs digital transition.
Helios Towers is expected to be the next foreign towerco to arrive in MENA. Helios Towers currently operate 10,694 towers across Africa; namely the Republic of the Congo, Democratic Republic of Congo, Ghana, Madagascar, Malawi, Senegal, South Africa and Tanzania. As a veteran of the African market, Helios Towers brings strong rural and power operational expertise and is well-suited for driving off-grid rollout across Oman’s mountainous terrain.
This experience may be leveraged in other MENA markets, particularly North Africa where they wouldn’t be far from home. Helios Towers did express interest in the Tunisian and Algerian markets at Meetup Africa.Given their rapid expansion and the mature state of the African tower market with most SLB deals having taken place, North Africa brings new M&A opportunities. North Africa could become the gateway for more African towercos to enter the Middle Eastern market.
Another African towerco who has shown interest in North Africa is TowerCo of Africa, a subsidiary of Axian Group. TowerCo of Africa are currently only active in Madagascar with 1,835 sites under TowerCo of Madagascar, but we expect to see carve-outs in other Axian Telecom markets shortly. This means the towerco has a lot of expansion on their plate, but their experience working in French-speaking markets make Tunisia and Algeria attractive countries to enter.
Paradigm infrastructure has also been interested in Ooredoo’s North Africa sites, having successfully set up operations in Tanzania under Minara Towers, a joint-venture with SBA Communications. Paradigm has a small but experienced management team with deep experience managing towercos in Africa and are well-placed for running towers in challenging markets. However, any condition requiring Ooredoo to retain equity would likely put Paradigm off, and it remains to be seen whether they would enter alone or alongside their partner SBA Communications.
A dark horse candidate could also be DigitalBridge. The digital infraco has investments across the Americas, Asia and Europe and an investment in the Middle East or Africa could be a useful diversification for the company, especially if it has capital to invest looking for an emerging market level or return. DigitalBridge has been linked with the sale of the Deodar portfolio in Pakistan.
TowerXchange understands that American Tower is giving little consideration to MENA as an investment opportunity given the small scale of many markets and the difficulties of entering and building scale quickly. However, the sizeable markets of North Africa may prove an exception, especially with a good quality counterparty like Ooredoo.
What this means for the MENA tower space
Ooredoo’s SLB deal makes two significant strides in the regional tower industry; increasing the ratio of towers in the hands of towercos versus MNOs and bringing towercos into new markets. In the GCC, towercos can hope to play a greater role in supporting digital transformation and open opportunities in new digital infrastructure verticals including more passive infrastructure management from MNOs such as fibre or data centres.
IHS Towers could consolidate their position in Kuwait, a new infrastructure provider will set up services and Qatar and with Oman Tower Company and Helios Towers both already present Oman is shaping up to look like a mature tower market. Iraq could be set to have a second towerco present alongside TASC, significantly boosting network development and recovery as MNOs can find support in rolling out new infrastructure.
Most exciting are the SLB deals in Tunisia and Algeria, which will likely be a turning point for a traditionally closed-off markets of North Africa. Although Maroc Telecom in Morocco has remained staunchly committed to retaining its passive infrastructure, their parent company e& are very aware of the advantages that SLB could bring.
Orange has previously expressed disinterest in using towercos but with 14,000 towers across Egypt, Morocco and Tunisia, a tower review underway, and a successful European carve-out TOTEM, there are plenty of opportunities in North Africa.
