Investors holding about two-thirds of tower company IHS’s equity are in support of a plan to change its governance structure as tensions between the Nigerian operator and its shareholders continue to sour.
Business Day understands shareholders also believe there should be a separation of the role of chair and CEO, both held by business person Sam Darwish.
Darwish cofounded IHS Towers in 2001. The company now has 39,104 towers in its portfolio and operates in 11 countries across Africa, Latin America and the Middle East.
Tensions have been mounting between IHS and MTN, one of its big shareholders, for some time. That tension and concerns raised by Africa’s largest mobile operator appear to have spilt over to other investors.
Last week, Business Day reported that Darwish is afraid that MTN could team up with another investor or parties to launch a hostile takeover of the Nigerian tower business.
Earlier in the week, MTN issued a strongly worded statement, calling out “governance concerns at IHS”. The mobile operator wants to have a greater say in IHS’s activities. It drafted a proposal to align its 26% equity stake and voting rights — capped at 20% — that failed to be put to a vote at IHS’s AGM. MTN accuses IHS management of intentionally holding back on notifying other shareholders about the proposal.
MTN is IHS’s largest customer, with the cellphone company having sold its network towers — and leasing them back — in its various markets.
French investment group Wendel and MTN, which together own about 45% of the company, argue that all shareholders with at least a 10% stake should have the power to nominate board members.
In response, IHS Towers hit back saying a proposal drawn up by the mobile operator to have a greater say in how the tower business is run isn’t in its best interests. It has also rejected a call by MTN to convene an emergency meeting of shareholders, saying the company doesn’t have the authority to do so.
In addition to MTN and Wendel, a group of investors — including Singapore’s sovereign wealth fund Old Mutual Africa Infrastructure Fund and Ninety One — making up another 15% of IHS equity are said to be backing these proposals for governance changes at the tower operator, in line with how other US-listed companies are governed.
Another major point of contention is the fact that Darwish remains CEO and chair of IHS. There has been a drive by corporate governance experts, shareholders and some regulators to break up CEO and chair roles at listed companies in the US. In SA, this is already common practice with the King Report on Corporate Governance stating that “the office of chairman and CEO must not be occupied by the same person”.
It is also understood that MTN boss Ralph Mupita is concerned about capital allocation at IHS, particularly the increasing debt profile as the company has been borrowing more since listing, as well as the company’s plans to expand into Latin America and Gulf states.
In 2022, IHS raised $1bn in debt funding through two bond issuances.
The company has also been expanding aggressively in countries such as Brazil, where it acquired a portfolio of 2,115 towers in 2022. A year earlier it purchased Skysites, Centennial Brazil and Centennial Colombia, acquiring 1,005, 602 and 217 towers, respectively.
In the same year, the group bought 200 towers in Kuwait and another 162 towers from Airtel Rwanda.
In October 2021, IHS listed on the New York Stock Exchange. At the time, MTN owned about a third of the company and was thought to be in line for a bumper payday by selling down the investment.
By June 2021, the group estimated the value of that 29% equity at R30.5bn. Selling down the stake, plus other moves, such as repatriation of funds from Nigeria, were billed as ways to eliminate MTN’s debt.
However, 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 stake in IHS, now at 26%, is worth about R14bn.
Because of the underperforming share price, MTN says it has not been able to dispose of the nonvoting portion of its shares in IHS and remains unable to vote all of its shares.
The tower company entered the SA market in 2022 after completing a R6.2bn sale-and-leaseback deal of MTN’s 5,700 towers in the country.
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