Helios Towers Africa to acquire 1,149 towers from Vodacom Tanzania

TowerXchange presents an exclusive interview with Helios Towers Africa CFO Andres de Orleans-Borbon

TowerXchange: Congratulations on Helios Towers Africa’s deal with Vodacom Tanzania! What was the rationale for the deal?

Andres de Orleans-Borbon, CFO, Helios Towers Africa:

Tower transactions are typically motivated either by financial engineering or by operating reasons. Emerging market operators with successful international strategies like Vodacom don’t need cash, so in this case the motivation was operational.

Vodacom are the number one operator in Tanzania, and they are investing in an important network expansion. They needed access to most of the infrastructure Helios Towers Africa owned in Tanzania, and they needed a programme to build a large number of new towers.

Vodacom and Vodafone are tenants on Helios Towers in Tanzania, Ghana and the DRC, so they knew they could rely on us to manage their towers and to rollout new infrastructure. And they liked the towerco platform and took a stake in that platform – the deal includes Vodacom acquiring a 24.5% equity in Helios Towers Tanzania.

TowerXchange: What can you tell me about the structure of the transaction and the BTS programme? There are reports that the acquisition price was US$75m – is that correct?

Andres de Orleans-Borbon, CFO, Helios Towers Africa:

The only guidance I can give you is that it is within the US $50-100m range.

What I can tell you about the deal is that it’s a long-term contract, that it includes all 1,149 of Vodacom Tanzania’s existing towers, and that it reduces Vodacom’s Total Cost of Ownership in terms of the discount to opex plus the maintenance capex. From a cash flow point of view, the transaction releases immediate savings for Vodacom.

All sites built under the build-to-suit (BTS) programme will be, owned, managed and marketed by Helios Towers Tanzania. All the other operators have access and are interested in the sites.

TowerXchange: Is there a power pass through clause or does Helios Towers Tanzania take on all the energy opex risk?

Andres de Orleans-Borbon, CFO, Helios Towers Africa:

There are many components to the deal, but I can tell you that we take on the brunt of the risk – if the grid fails, that is our problem, if efficiency is improved, that is our gain.

Vodacom are convinced we can achieve efficiencies, otherwise they wouldn’t have taken a stake in the towerco.

When an operator retains a stake it incentivizes them to work with us as partners to ensure the towerco is successful. For example, when we might want to decommission one of two adjacent HTT and Vodacom towers as both operators are shareholders in the towercos, the discussion is an easier one. Where operators buy into the towerco, it suggests the deal is fair for all parties.

TowerXchange: With LTE being trialed and rolled out in Tanzania, what’s the impact on the tower market?

Andres de Orleans-Borbon, CFO, Helios Towers Africa:

The impact of LTE varies from country to country. If LTE is rolled out at a higher frequency than 2G and 3G, then operators will need to densify their networks. If operators need higher density, they don’t want to build new towers and own every tower, so independent towercos can fill the gaps in the network. Towercos need new technologies being rolled out and new technologies need towercos.

TowerXchange: Please introduce us to the tower market in Tanzania.

Andres de Orleans-Borbon, CFO, Helios Towers Africa:

There are four large operators in Tanzania; Vodacom, Airtel, Millicom and Zantel.

The infrastructure can be broken down into three pools of assets; Airtel own their towers, Zantel own their towers and Helios Towers Tanzania will own the towers that were the heritage of Millicom and Vodacom. All three pools of towers will likely be available to all operators in a competitive market.

The other operators, Sasatel, TTCL, Benson, Smile and Rural NetCo are all important customers and will likely lease capacity on ours and other operators’ towers.

TowerXchange: After the two transactions by Millicom and Vodacom, is there still a market for Zantel’s towers?

Andres de Orleans-Borbon, CFO, Helios Towers Africa:

Zantel is very strong in Zanzibar so their tower assets have value. If Zantel want to sell, we’ll talk to them.

This transaction doesn’t end Helios Towers Africa’s appetite to own further infrastructure in Tanzania and make it available to all mobile operators.

In any market where towers have been transferred from operator-captive to independent towercos, there is still a market for towers in unique locations. If towers for sale are located right next to other towerco owned sites, they might attract a reduced valuation, so there is an advantage to being first movers.

TowerXchange: Finally Andres, as Helios Towers Africa have been pioneering first movers in African towers, what progress has been made in demonstrating reduced execution risk in what is still quite a new African tower industry?

Andres de Orleans-Borbon, CFO, Helios Towers Africa:

It takes a certain type of investor to be attracted to opportunities in emerging markets. While you can’t take the risk out, towercos are one of safest investments in emerging markets. You need to know what you’re doing to prosper in emerging markets, so it’s important to choose your management team very carefully.

Vodacom are smart investors – their international business is doing very well. Millicom is a very entrepreneurial operator.  When two such companies want a piece of your business, it’s a huge vote of confidence in Helios Towers Africa and in the emerging market tower industry.

TowerXchange: Here’s the official press release about the deal…

Helios Towers Africa to partner with Vodacom in Tanzania

Helios Towers Africa (HTA), the leading, independent, telecoms towers company in Africa, announces that its Tanzanian subsidiary, Helios Towers Tanzania (“HTT” or “the Company”) has reached an agreement with Vodacom Tanzania Limited (“Vodacom”), Tanzania’s leading mobile network operator to acquire 100% of its existing tower network in the country for stock and cash in Vodacom Group’s first ever towers transaction.

The partnership between HTT and Vodacom involves the transfer of 1,149 existing telecoms towers from Vodacom to HTT and a commitment to an ambitious, short-term rollout which will see a significant increase in points of service owned by HTT and more than doubles HTT’s existing presence in Tanzania.

Transaction highlights

  • HTT acquires all of Vodacom’s existing passive infrastructure and supplies Vodacom with a significant increase in points of service in Tanzania
  • Vodacom to lease back the infrastructure subject to a long term contract
  • Pro forma for the acquisition, HTA will be providing close to 2,700 points of service to Vodacom and affiliates across Africa

The deal will expand HTA’s tower coverage in Africa to 4,700 owned towers and is another example of HTA partnering with an industry-leading mobile network operator in Africa. This partnership model is core to HTA’s offering.

By collaborating with its customers and being solely focused on providing a telecoms infrastructure solution, HTA helps its customers to achieve their goals of reducing operating cost, preserving capital, focusing on their core business, and mitigating the proliferation of towers through infrastructure sharing, as they expand network coverage and capacity to meet demand and improve quality of service.

The structure of the cash and shares transaction, which involves Vodacom acquiring a 24.5% share in HTT, also demonstrates the belief and confidence of a leading African telecoms operator in the business model of tower sharing and in the business model and operational capabilities of HTA.

The transaction is subject to customary closing conditions and regulatory approvals.

Chuck Green, Chief Executive Officer of HTA, added:

“HTA is proud to be chosen by Vodacom as its partner for the ownership and management of its existing infrastructure and as the solution provider for its future roll out. This is a ground-breaking move for Vodacom and their equity investment is a significant endorsement of HTA’s reputation, management team and operating track record.”

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