Less than three weeks after MTN signalled that it was unlikely to sell its quarter stake in IHS for the next three to five years, Africa’s largest mobile operator has accused the Nigeria-based tower operator of blocking its bid to have a greater say in how the business is run.
MTN has been at odds with management at IHS Towers for some time. The group is now calling for an emergency shareholder meeting to air its concerns.
The history
Earlier in the month, Bloomberg reported that the tower operator's recently held AGM had devolved into a tense standoff over investor power after it dismissed demands from two of its largest stakeholders.
Wendel and MTN, which together own about 45% of the company, argued that all shareholders with at least a 10% stake should have the power to nominate board members, said sources.
According to MTN, the matter is about equalising its ownership and voting rights in IHS.
On Tuesday, the group — headed by CEO Ralph Mupita — issued a strongly worded statement, calling out “governance concerns at IHS”.
“MTN strongly believes that IHS has wilfully breached the shareholders’ agreement and articles by failing to notify its shareholders of the proposal and denying its shareholders the opportunity to vote on it at the AGM,” the group said.
At the core of the issue is that MTN wants to have a greater say about IHS’s activities. Currently MTN’s voting rights do not match its ownership in the company, and this is what it wants to change — but IHS appears to be trying to slow this down.
The JSE listed mobile company owns 26% of IHS but has voting rights capped at 20%.
The group had drawn up a proposal to align its equity stake and voting rights that was meant to be voted on at the AGM, but this did not happen. MTN accuses IHS management of intentionally holding back on notifying other shareholders about the proposal.
“The proposal was intended to protect important shareholder rights and to better align IHS’ corporate governance with other publicly traded companies. Under the shareholders’ agreement and its articles, IHS was required to include the proposal on the agenda for the AGM, notify all other shareholders of the proposal and allow shareholders to vote on the proposal at the AGM,” said MTN.
Underperforming share price
In October 2021, IHS made its US stock market debut, listing on the New York Stock Exchange. At the time, MTN owned about a third of the company and was thought to be on a path to a bumper payday, when it would eventually sell down the investment.
By June 2021, the group estimated the value of that 29% equity at R30.5bn. Selling down this stake, plus other moves such as repatriation of funds from Nigeria, were billed as ways to wipe out the group’s debt.
Unfortunately, market conditions have seen IHS lose half its value since listing. Having debuted at $16.69 a share, it now trades at $8.59. And even with a weaker rand, MTN’s piece of IHS, now 26%, is worth about R14bn.
Similar market conditions scuppered Telkom’s efforts to list its tower business, Swiftnet, on the JSE a few months later in early 2022. Telkom had valued the unit at R13bn but failed to get even three-quarters of that when testing the market.
Because of the underperforming share price, MTN says it has not been able to dispose of the non-voting portion of its shares in IHS and remains unable to vote all of its shares.
As such, the group is calling for an emergency meeting of IHS's investors.
“MTN has requested the IHS board to call an extraordinary general meeting of the IHS shareholders to consider the above-mentioned proposal, and any other shareholder proposals relating to governance, to which the group awaits a response.
“Beyond this, MTN is currently evaluating all its options with the intention of fully enforcing the shareholders’ agreement and articles.”
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