Read this article to learn:
- The structure and value of Airtel’s tower transaction with IHS in Zambia and Rwanda
- The Rwandan tower market post-acquisition and the launch of ORN
- The Zambian tower market post-acquisition
- A comparison of the cost per tower paid by each of Africa’s ‘Big Four’ towercos in transactions to date with Airtel
IHS recently announced the acquisition of 1,100 towers from Airtel in Zambia and Rwanda. In fact the provisional tower count is 929 in Zambia and 184 in Rwanda, for a total of 1,113. We estimate the deal value to be US$181mn, placing the transaction in the 3rd quartile in terms of cost per tower among Airtel’s recent African tower sales.
Airtel’s only logical counterparty for their tower sale in Zambia and Rwanda was IHS. IHS’s acquisition of 1,113 towers from Airtel (929 in Zambia, 184 in Rwanda) was announced in mid December 2014. The deal consolidates Africa’s largest towerco’s leadership of the tower markets in Zambia and Rwanda, following a similar sale and leaseback agreed between IHS and MTN in May 2014. IHS will provide a full “tower and power” service in both Zambia and Rwanda, assuming ownership and responsibility for investment in energy equipment as well as the towers themselves. IHS now has over 21,000 towers in Nigeria, Cameroon, Cote d’Ivoire, Rwanda and Zambia – more than double the tower count of the next largest towerco in Africa.
With an estimated US$181mn raised through the sale of this latest tranche of towers, Airtel has brought the proceeds raised from their African tower sale to a running total of around US$2.3bn with the sale of towers in just two relatively small countries, Gabon and Madagascar, still to be announced. TowerXchange therefore are sticking to our forecast that Airtel’s African tower sale will net a total of US$2.5bn, primarily used to pay down debt generated by Bharti Airtel’s original US$10.7bn acquisition of Zain’s SSA business.
Airtel’s African business has been reducing trading losses on a subscriber base of ~86mn in SSA. Airtel Africa recorded a net loss of US$137mn on revenue of $1.164bn during Q1 2014.
“We are delighted to partner with IHS, which has a proven track record in passive infrastructure management in Africa and look forward to working with them. This agreement will accelerate infrastructure sharing amongst operators and benefit customers in form of affordable tariffs and wider network coverage”
– Christian de Faria, MD & CEO – Africa, Bharti Airtel
Details of the deal
According to a statement issued by Airtel to the Rwandan stock exchange, Airtel has entered into an agreement with IHS Zambia for the sale of 100% of the equity in Zambian Towers Limited, Airtel’s Africa Towers subsidiary in Zambia. The value of the Zambian tranche of the transaction is US$151mn, subject to the usual adjustments based on the number of sites actually delivered, working capital et cetera.
TowerXchange has learned that the transaction includes 929 towers in Zambia, which works out as an average cost per tower of US$162,540. The deal also includes 184 towers in Rwanda, although no data on the acquisition cost has been made available from Rwanda.
TowerXchange estimate the total deal value to be ~US$181mn. The initial term is ten years.
The deal remains subject to regulatory approval.
“We have been working with Airtel for many years. And we are very pleased to have signed our first Buy and Lease Back transaction with Airtel. The opportunity to expand our East African business bringing IHS’ market leading energy and infrastructure management practices to a wider market is an excellent opportunity. We are very excited that following this deal more mobile phone users will benefit from the efficiencies and increased network uptimes that will result”
– Issam Darwish, Executive Vice Chairman and Group CEO, IHS
Airtel had already announced the sale of 11,400 African towers, divided as follows:
- 3,100 towers to Helios Towers Africa, believed to be in Tanzania, DRC, Congo B and Chad at an acquisition cost of US$400-500mn
- 3,500 towers to Eaton Towers, believed to be in Ghana, Niger, Burkina Faso, Kenya, Uganda and Malawi at an acquisition cost of US$525-700mn
- 4,800 towers to American Tower in Nigeria for a confirmed acquisition cost of US$1,050mn
Airtel’s counterparty for the sale of towers in Gabon and Madagascar has yet to be announced, but TowerXchange believe that Helios Towers Africa and Eaton Towers respectively are the most likely acquirers of those assets. We understand Airtel will retain their towers in Sierra Leone.
How TowerXchange forecast the Airtel towers will be divided among Africa’s towercos
Implications for Rwanda and Zambia
IHS previously acquired 1,269 towers in Rwanda and Zambia from MTN in May 2014. When closed, IHS’s acquisition from Airtel will bring the total number of towers acquired by IHS to 734 in Rwanda and to 1,648 in Zambia, plus such towers as have been built in H2 2014 under build-to-suit programmes. IHS now owns significantly more than 50% of the towers in each country.
As the newest market entrant with the least mature network, Airtel has the most to gain from infrastructure sharing among the three international operators in Rwanda.
Licensed in September 2011, Airtel had accelerated their launch into Rwanda with the acquisition of liquidated Rwandatel’s towers for US$15.5mn back in 2012, a network they have since supplemented before selling to IHS. MTN had a monopoly on the mobile market in Rwanda until 2006, and thus had the country’s largest network until the sale of all 550 of its towers to IHS in May 2014. Millicom-Tigo is the #2 operator in Rwanda. LTE has been launched in Rwanda thanks to ORN, an open-access LTE infrastructure joint venture between the Rwandan government and KT Corp, launched in November 2014. Mobile penetration is around 65% in Rwanda.
Mobile penetration in Zambia was reported by ZICTA as 63.8% in Q3 2014, with 23% mobile Internet penetration. As Airtel and MTN vie for market leadership, thus IHS has acquired Zambia’s two largest networks from the country’s most credit worthy anchor tenants. Third ranked operator Zamtel was seized by the Zambian government from LAP GreenN in 2012 and remains embroiled in legal dispute.
By November of 2014, Huawei had built 147 of 500 rural towers on behalf of the Zambian Information and Communication Technology Authority (ZICTA) – a project to be completed by 2016, with the towers to be shared among Airtel, MTN and Zamtel.