Investment firm Blackwells Capital has formally written to IHS demanding a makeover of its board. It joins MTN and Wendel in voicing concern over alleged governance issues at Africa’s largest cellphone tower business.
This is the latest in a series of events that sees IHS, which was cofounded in 2001 by current CEO Sam Darwish, at odds with its investors over governance issues.
In a strongly worded letter, sent on June 28, Blackwells — which owns 12% of IHS — demanded that the tower operator reconstitute its board “with genuinely independent directors, with deep experience in the industry, and who have the clarity of insight to hold management and themselves accountable for their performance”.
The US-based firm, which has experience investing in telecommunications and related infrastructure, has also called for proposed reforms from MTN and Wendel to be heard and voted on by shareholders.
Earlier in the month, 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.
In the same 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. The company entered the SA market last year when it bought almost 6,000 towers from MTN.
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.
Together with Blackwells, it means shareholders with just under 60% ownership are calling for change at IHS.
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 is not in its best interests. It has also rejected a call by MTN to convene an emergency meeting of shareholders, saying the company does not have the authority to do so.
The company now has 39,104 towers in its portfolio and operates in 11 countries across Africa, Latin America and the Middle East.
Business Day understands that a group of investors — including Singapore’s sovereign wealth fund, Old Mutual Africa Infrastructure Fund and Ninety One — is backing the proposals for governance changes at the tower operator, in line with how other US-listed companies are governed.
Like MTN, Blackwells is concerned about capital allocation at IHS, particularly the increasing debt profile as the company has been borrowing more since listing, as well as expenditure that it says is unclear.
Blackwells says IHS is hiding behind Cayman Islands law — owing to its registration in that part of world — that it does not have to make certain disclosures to the market. As such, the investment firm has also called for a re-registration of IHS in the US, specifically in Delaware or Maryland, for this and tax reasons.
With other shareholders, another point of contention is that Darwish remains CEO and chair of IHS. There has been a drive by corporate governance experts, shareholders and some regulators to break up the 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”.
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