Forget everything you know about the MENA telecom tower market

In an unexpected announcement, two operators, Ooredoo and Zain, have announced a planned combination with TASC Towers to create a 30,000-strong towerco for the Middle East. Following the successful conclusion of the negotiation, the deal would need to pass the normal regulatory processes, no sure thing in MENA, and would become the 14^th largest towerco in the world, the 8^th largest multi-country towerco, and the 7^th largest operator-owned towerco globally. Read on to find out more.

Ooredoo Group have been evaluating a tower deal for some time as previously covered by TowerXchange, but the structure of this deal is unexpected. TASC Towers has long had a close relationship with Zain but it is unusual for a towerco and two mobile operators to merge operations. In TASC Towers’ transactions with Zain in Iraq and Jordan the mobile operator negotiated a 20% stake in the country opcos, paving the way for a closer relationship and this mega merger.

Combining the towers owned by TASC in Jordan and Iraq with Ooredoo’s assets in Qatar, Kuwait, Algeria, Tunisia and Iraq will create a combined towerco with 30,650 towers. The jointly-owned operator-backed but independently managed towerco structure makes the new towerco difficult to value but we have some valuation benchmarks we can turn to.

Since 2020, Zain has sold 17,264 of its towers to three different entities in four markets for a combined consideration of US$1.2bn. Price paid per tower has varied from US$33,755 in its sale to TASC Towers Jordan to US$99,764 in its sale to Latis in Saudi Arabia. In Jordan and Iraq Zain has raised less capital in return to lower lease rates. In Saudi Arabia, where the local opco Zain KSA had debts to cover a higher price was agreed. Depending on how much capital Ooredoo and Zain wish to raise, the lease rates agreed, and the degree to which the new towerco entity is enabled to compete for lease-up and new sites it could be worth from US$1bn to US$3bn. Following further lease-up and professionalisation of operations the giant towerco could be worth multiple of that – although only a handful of towercos or investors worldwide could acquire the whole thing in any potential exit.

No news was released on TASC Towers’ acquisition of 500 towers in Bahrain from Zain, nor on the Ooredoo process in Oman. In Oman there are already two towercos active and a past transaction between Helios Towers and Omantel has set a much higher benchmark, suggesting Ooredoo will follow a separate valuation process in that market. With TASC’s purchase of towers in Bahrain still delayed in regulatory approvals, it has understandably been left out of this new process.

The towerco would be the largest towerco in the Middle East and North Africa (MENA) region, and comparable in size to the combined Middle East and African (MEA) operations of either IHS Towers (31,799) or American Tower (24,040). See our Towerco League Table to see where the towerco would rank. The enlarged company would continue to operate as an independent and standalone entity providing passive infrastructure as a service throughout the region with a focus on operational efficiencies, synergies and reduction of carbon footprint. There is no deeper relationship on active sharing on the table, with both Ooredoo and Zain keeping their active infrastructure and networks.

Etisalat and partners Maroc Telecom have done little to monetise or separate management of tower networks in MENA. Similarly, Orange has reviewed its operations and decided against a separation of infrastructure. Only stc, of the remaining regional operators has separated infrastructure (forming TAWAL), but this has not followed in its smaller markets in the region. Following the deal two operators would be significantly more capital light in their operations than their competitors.

The tower markets in which the new towerco will operate are diverse in terms of economy, population and towerco maturity. Qatar’s GDP per capita is eleven times that of Iraq, Algeria’s population is 12 times that of Qatar, and Oman is home to two towercos, while Algeria’s FDI rules have scared off most towercos from considering investing at all.

Algeria: TowerXchange estimates there are 19,350 towers in Algeria, of which Ooredoo own 5,000. The country has a developed MNO market with 4G rollout still progressing. There have been some half-hearted moves in favour of infrastructure sharing by the regulator, but they have been stop-go. Algeria also maintains a 51% domestic ownership rule which has deterred international towercos investing in its towers. An ownership structure which involves a domestic towerco could ease these concerns and enable the creation of an independent towerco to work with the country’s three MNOS, Djezzy, Mobilis and Ooredoo.

Iraq: TASC Towers is already active in Iraq having acquired 5,100 sites from Zain earlier this year. There are over 17,000 towers in the Iraqi market which is still rebuilding its network and rolling out 4G. Ooredoo’s brand in the market Asiacell has the largest portfolio with 7,500 towers. The combined towerco would own 63% of the market. TASC Towers also has a build-to-suit agreement for 198 sites with Zain meaning most co-location and a significant amount of BTS in the market would flow to the new towerco.

Jordan: Jordan is one of the oldest towerco markets in the region and where TASC Towers got their start. In 2021 Zain agreed to sell 2,607 towers to TASC Towers, giving it 3,100 or the 8,300 towers in the country. The combination of towercos would do little to change the internal market dynamics, but the larger overall operation and scope for investment could change the scope for investment in efficiencies and new energy infrastructure in the country. The additional capital available could also enable the new towerco to compete for build-to-suit for Orange and Batelco-backed Umniah.

Kuwait: Kuwait is a fascinating market as it was one of the earliest towerco markets in the region, and the first to see a sale-and-leaseback transaction. In 2020 Zain agreed a sale of 1,620 towers to IHS Towers for US$130mn and kicked off the wave of investment the region is now seeing. IHS Towers has been consolidating its position in the market for some time, and no doubt had its eyes on Ooredoo’s 1,200 sites. However, it appears that Kuwait will now enjoy two towercos. IHS Towers has been building towers in the country and is still seeing towers transferred from Zain, so the entrance of a new towerco will change dynamics in the market.

Qatar: Qatar is home to just two mobile operators, Ooredoo and Vodafone and would thus be not a major target for towercos were it not for its huge gas wealth and ambitious domestic construction plans. Ooredoo own 2,900 of the 5,000 towers in the market, and the introduction of a towerco is likely to see tower build for both operators flow to it. The scope for investment in cutting-edge digital infrastructure is also huge. Lease-up may be limited in Qatar, but will become a home to next gen connectivity services.

Tunisia: In March at TowerXchange Meetup MENA we learned that Tunisie Telecom was planning a carve-out of its 2,850 towers. We estimate that Ooredoo also own 2,850 towers in the market with Orange owning the balance of the 8,000 total towers. There is also a nascent towerco called NATIC present, but which has failed to make significant progress in acquiring or building towers. 15% of sites have swaps and part of the new towerco’s plans will be to convert these to commercial agreements rather than equipment swaps.

In three major markets this move means little. In Egypt we are still yet to see the ramp up in build-to-suit activity which enticed IHS Towers to bid for a towerco licence there. We have also yet to see development of Telecom Egypt’s tower strategy or the entrance of Vodacom’s towerco carve-out MAST follow from South Africa. In Saudi Arabia Zain have sold to PIF-backed Latis and the giant market is enjoying its own dynamics. And in Oman, as mentioned above, there is a separate tower sale process in progress which we expect to hear more about soon. Three smaller potential towerco markets are also untouched. As discussed above, we await a tower sale by Zain to TASC Towers to pass regulatory muster in Bahrain. An in Sudan and South Sudan, Zain’s sales are on hold while violence grips Khartoum.

If the deal is agreed and closed the towerco market will be turned upside down.

In total, 15 markets are now seeing significant towerco activity, and in five countries we see a pathway to a majority of sites being towerco-owned by the end of the year. Saudi Arabia has been seeking to create regional towerco champions through TAWAL’s international investments in Pakistan and Europe and domestically through the newly-formed Latis. From Africa, IHS Towers and Helios Towers have also been investing in the region and now face a giant competitor. The region’s development just kicked up a gear – stay tuned to see what happens next.

Ooredoo, Zain and TASC have been approached for comment.