MTN and IHS have put aside some of their difference, ironing out a renegotiated agreement around the mobile operator’s tower leases in Nigeria.
The move helps the communications group to reduce amounts that it has to pay for the infrastructure in foreign currency, specifically the US dollar.
Given the macroeconomic challenges in the West Africa, MTN had been in talks to restructure its tower leases.
A portion of the leases are priced in dollars, despite being invoiced and paid in naira. Still, MTN has to record unrealised foreign exchange losses in its income statement.
As such, the group has renegotiated these terms.
IHS, in which MTN holds a 26% stake, has had an acrimonious relationship with investors in the past year due to governance issues. Apart from being its largest investor, MTN is IHS’s largest customer.
IHS owns 16,000 towers in Nigeria, of which MTN leases 13,500.
“We’re here to support MTN, Sam Darwish, chair and CEO of IHS Towers,” told Business Day. “We have been working with MTN for more than 20 years, across so many markets in Africa.
“We’ve had some challenges last year, but I think largely due to the fact that the markets that we operate in have been extremely challenging. When there is outside pressure it creates anxiety. It puts pressure, even on partners, family members and spouses, to be honest.
“This announcement is confirmation and commitment that these partners for the last two decades, will be partners for the next decade. Come what may, network availability is our number one priority. We may have the odd issue here and there but that’s what has made us different from everyone else,” he said.
The amended terms are effective from the start of April 2024, with existing contracts having been extended to December 31 2032. Before this new deal, the site leases expired variously between December 2024 and December 2029, with the majority expiring in 2029.
MTN said the revised terms “meaningfully reduce the US dollar-indexed component of the leases linked to a discounted US consumer price index (CPI), making the leases majority naira-linked, as well as set a cap for the naira CPI escalator component.”
The new deal also incorporates an energy cost component indexed to the cost of providing diesel power, however, the terms also provide for some discounts and incentives over the life of the contracts.
“The renegotiated terms aim to mitigate macro risks affecting MTN Nigeria as well as support margin recovery and resolution of its negative equity position,” the JSE listed mobile provider said.
This comes after tensions were sparked between Africa’s largest mobile operator and the continent’s biggest tower provider last year, leading both companies to sign deals with other players to reduce reliance on each other.
In September 2023, MTN Nigeria said its leases on 2,500 sites, due to expire in 2024 and 2025, had been awarded to ATC Nigeria after a bidding process. Earlier in 2022, IHS announced that it had signed up Airtel for thousands of new network sites in West Africa.
But even here, a comprise has been reached. MTN Nigeria, ATC Nigeria and IHS Nigeria have reached a mutual agreement regarding the sites that were awarded to ATC from the IHS portfolio.
After trilateral discussions, the parties have agreed to a revised allocation of sites in terms of which ATC will provide tower services for up to 2,100 sites, while IHS will manage up to 1,400 sites. This includes 1,000 new MTN sites to be rolled out over the next few years, to be allocated between the two tower operators.
MTN’s commercial relationship with IHS extends to its home market where the group completed the sale and leaseback of its SA towers in a R6.2bn deal in June 2022. That deal saw IHS taking ownership of and leasing back 5,700 towers to Africa’s largest mobile operator.
In July IHS shareholders approved a proposal to amend the company’s memorandum and articles of association, with a number of key items. These include reducing the threshold for shareholders to nominate directors from 30% previously to 10% on an individual shareholder basis after the AGM for the 2024 financial year, and on an aggregate basis after the AGM for 2025.
In July 2023, shareholder Wendel filed a case with the grand court of the Cayman Islands to force a vote at IHS on governance proposals after the board failed to put it forward at its June shareholder meeting. In August, MTN threatened similar court action against IHS.
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