Telecom Egypt has been in talks with several local and foreign companies for a potential sale leaseback of a significant portion of its tower portfolio, with bids reportedly ranging from US$150m to US$250m for approximately 2,500 of Telecom Egypt’s 2,800 towers. This puts Telecom Egypt’s valuation per tower at between US$60,000 – US$100,000.
These 2,500 sites are understood to be around 50% macro towers and 50% rooftop sites, with most of the network in urban areas. The deal is also understood to include a build-to-suit commitment of 1,500 – 2,000 sites.
Local newspaper Daily News Egypt reported that three bidders were involved in the process; IHS Towers, Helios Towers and local towerco Mobi Tower. TowerXchange has confirmed through sources that Helios Tower is not involved in the bidding process, while IHS Towers declined to comment.
Bidders are carrying out due diligence ahead of a potential acquisition, and the entire transaction is expected to be finalised by Q1 2024.
Egypt has been a challenging market for the tower industry to break into. In 2021, IHS Towers made headway by securing the first international towerco license as part of a revised NTRA framework acknowledging the value of a dedicated telecom infrastructure partner to supporting Egypt’s growing telecom infrastructure gap.
Prior to this, two local firms held towerco licenses, managed service provider HOI-MEA with a small 38-tower portfolio, and Mobi Tower. However, both firms were focused on the managed services side rather than tower deployment and ownership.
IHS Towers, despite securing their license and a 5,800-tower commitment, had failed to make any further progress in building up a portfolio, either through greenfield deployments or acquisitions. This partly fell on the macroeconomic challenges that rocked the Egyptian market during COVID and the Ukraine war.
These shocks led to a spike in the cost of living, devaluation of the Egyptian pound and a shortage of US$ in the market, in turn impacting the import and procurement of materials and equipment. The impact of fuel and bread subsidies also put a huge strain on state finances, leading to the sale of many state-owned assets.
This may be the reason why a tower sale is finally materializing. Telecom Egypt has been trying to sell its portfolio for a long time without much success. The change in tone may be driven by the need to raise US$, indicated by the fact that the MNO is asking for bids in US$.
Since towercos earn lease revenues in local currency, this creates exposure for any would-be buyer to fluctuations of the Egyptian dollar, although US$- fixed tenancy rates can help mitigate this.
IHS Towers is still recovering from the loss of a major source of revenue in their home Nigerian market, as MTN unexpectedly announced their decision to renew with competitor towerco American Tower Nigeria for 2,500 sites despite their long-term relationship with IHS. Nigeria’s tough macroeconomic situation also led to significant reported losses according to IHS Towers’ last earning report.
The towerco is also facing massive challenges in South Africa having won an enormous 13,000 site power managed service contract with MTN prior to the decline of the country’s energy grid, requiring significant investment in additional back-up power equipment.
Given these headwinds, it's likely that IHS will prioritise available capital to shore up existing portfolios instead of expanding into new challenging markets. Mobi Tower emerges as a front runner for a potential sale leaseback. Having been acquired by major Egyptian digital infraco Benya Group, Mobi Tower has begun building up its portfolio by securing a 300-site rural deployment contract from the government to support Telecom Egypt's’ rural coverage.
TowerXchange is also aware of the towerco’s ambitions to play a larger role in the local market and has been exploring opportunities to grow its portfolio through acquisitions as well as build-to-suit.
Securing the acquisition of Telecom Egypt’s portfolio will provide the potential winner a strong platform to scale operations in one of MENAs most opportunistic tower markets. Despite economic headwinds, Egypt has a population of 109 million people, 3 MNOs, and fast adoption of technology leading to big demand for 4G and upcoming 5G rollout.
This transaction follows a broader trend in the North Africa region, which is seeing an acceleration in towerco penetration. TASC Towers is entering Algeria and Tunisia via their joint-venture merger with Zain to TASC Towers, and while no progress has been made so far TowerXchange is aware of several towercos exploring build-to-suit services in Morocco.
Egypt’s two other MNOs Etisalat Egypt (66% owned by UAE-based multinational MNO e&) and Orange Egypt have so far remained committed to retaining their tower infrastructure. Orange reaffirmed a commitment to retaining ownership of its MEA tower infrastructure after a passive infrastructure review last year.
E& has also yet to engage in any tower sales, and its current M&A strategy appears to be in growing the balance sheet. However, Ooredoo’s decision to embrace the tower model shows the infrastructure ownership narrative is starting to change in the region.
TowerXchange will be observing developments in Egypt carefully over the next months, but there’s no better place to get up to speed on the latest developments in the region than TowerXchange Meetup MENA on 7-8th February 2024.
