MTN has completed the sale and leaseback of its SA towers in a R6.2bn deal that will allow it to invest more in fibre.
The purchase by Nigeria’s IHS Towers will further MTN’s goal to exit noncore assets.
The deal, first announced in November 2021, sees IHS taking ownership of and leasing back 5,700 towers to Africa’s largest mobile operator.
The transaction will also include the outsourcing of power and related services across MTN SA’s entire footprint of about 13,000 sites, thus incorporating an additional 7,100 third-party sites.
IHS said on Wednesday the acquired assets, together with the power management services across MTN SA’s portfolio, are expected to deliver revenue of about $192m (R2.98bn) and adjusted earnings before interest, tax, depreciation and amortisation of about $85m in the first year of operations.
The transaction, which recently received regulatory approval from the Competition Commission, marks IHS’s entry into the SA market, making it the country’s largest independent tower operator.
The company now has an operational footprint in 11 emerging markets with seven in Africa, in addition to four in Latin America and the Middle East, with a global count of nearly 39,000 towers.
Sam Darwish, IHS Towers chair and CEO, said: “Through this transaction, IHS has now entered the most industrialised economy in Africa as SA’s largest independent tower operator. MTN Group have been a long-term partner of IHS, and I am delighted that we will expand that collaboration and facilitate mobile connectivity in SA.”
MTN is a 26% shareholder in IHS, which made its US stock market debut in 2021. At the time of writing, that stake is worth just under $1bn (R15.51bn), based on its $3.84bn market cap on the New York Stock Exchange.
In a sign of the times, competitor Telkom is listing its masts and towers division, estimated to be worth R13bn, as a separate company, Swiftnet, on the JSE.
SA is the last major market in which MTN operates to conclude similar deals, with its fibre expansion plans similar to those of Telkom and Vodacom.
While a lot has been said about MTN’s objective to create a separate financial technology (fintech) unit to house its mobile money operations, the group has also been working on a plan to create a stand-alone fibre operator.
Rival Vodacom recently inked a R13bn deal to combine its fibre assets with Remgro telecoms unit Community Investment Ventures Holdings (CIVH), while Telkom is continuing with the separation of its fibre unit, Openserve.
While the turn of the century and the 2010s saw operators race to see who had the most cellphone towers, the next frontier is fibre networks as online consumption rises.
The IHS deal puts money in MTN’s pockets, which group CEO Ralph Mupita says will help to “strengthen the balance sheet and improve returns”.
Despite completing the deal, MTN’s share price on the JSE fell the most in more than a month, down 4.03% at R162. Analysts contacted by Business Day were unable to peg reasons for the fall.
Update: June 1 2022
This story has been updated with additional information.
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