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MTN has taken a firm decision to buy the 75% it doesn’t already own in Africa’s largest cellphone tower operator, IHS, for $2.2bn (R35bn) in an all-cash transaction, with the group saying the deal will result in service-revenue uplift and core earnings margin expansions.
MTN, Africa’s largest network provider, on Tuesday said that after the deal, which values IHS at $6.2bn, the tower operator will delist from the New York Stock Exchange.
The synergies for the transaction are clear-cut: MTN operates in all of IHS’s African markets and IHS derives about 70% of its revenue from MTN.
The Ralph Mupita-led telecom major said the deal will amplify the group’s ability to cater to its own network requirements and provide solutions for wholesale customers.
“The transaction will help to enhance and accelerate the scaling of MTN’s digital infrastructure platform, which is spearheading the group’s strategic priority to consolidate passive infrastructure critical to network performance and rollout,” it said in a regulatory filing.
“This includes the densification of networks to support evolving 5G and fixed wireless access requirements…. We anticipate MTN to benefit from the strong financial merits of the transaction, with service-revenue uplift and ebitda margin expansion as ownership economics and efficiency initiatives are realised. We expect the transaction to result in net income and free cash flow accretion.”
The proposed transaction is subject to regulatory approvals.
New chapter
The successful conclusion of the deal would start a new chapter for a long-running partnership between the two African operators, whose relationship has been a symbiosis of aligned business interests, punctuated by moments of boardroom rivalry.
As IHS’ largest shareholder with a one-quarter stake, MTN has been mulling the future of its investment in the Nigerian tower company for a few years.
The relationship between the two companies has had its ups and downs. In August 2024, IHS and MTN put aside some of their differences, announcing a renegotiated agreement for the mobile operator’s tower leases in Nigeria. The move helped MTN to reduce the amounts that it has to pay for the infrastructure in foreign currency, specifically the dollar.
The transaction will help to enhance and accelerate the scaling of MTN’s digital infrastructure platform, which is spearheading the group’s strategic priority to consolidate passive infrastructure critical to network performance and rollout.
— MTN
Much of the tension between IHS and shareholders comes down to its stock market performance. 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 eventually sold 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, was billed as a way to wipe out the group’s debt. Unfortunately, market conditions caused IHS to lose half its value by mid-2023, causing tension to boil over among investors.
MTN, valued at R356bn on the JSE, laid out the guiding principles of an effective integration of IHS into the group.
The group said it will include independent governance and structure.
“IHS will be housed within MTN’s digital infrastructure platform and operate as a standalone business with its own distinct board and management team, preserving operational integrity and ensuring clear financial accountability,” it said, adding that IHS will continue to serve all customers, including MTN competitors, on an open-access and arm’s-length basis.
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