The International Finance Corporation plans to inject $100 million into Helios Tower Africa (HTA) Ltd, in a deal that will see the latter increase its presence on the continent.

The Mauritius-based HTA plans to acquire telecommunication towers from operators, develop them, then lease them back to the industry.

IFC, the World Bank investing arm, said it is considering a $25 million investment in equity in HTA, while its African, Latin American and Caribbean Fund (ALAC), plans to invest $75 million in the company.

“HTA’s new project involves expanding the company’s number of towers, particularly in Tanzania, through the acquisition of tower portfolios from mobile network operators and building new ones to suit their requirements. It is expected that the project will see HTA increase its tower portfolio to more than 6,000 from the current 3,000,” said IFC in its disclosure documents.

HTA, in partnership with the London-based investment companies Helios Investment Partners and Rothschild Investment Trust, as well as the US-based Albright Capital Management, is acquiring and developing Tanzania’s telecommunication towers.

Vodacom deal

Mid last year, HTA said it had entered into an agreement with Vodacom, one of Tanzania’s largest mobile operators, to buy 1,149 existing telecoms towers in a stock-and-cash transaction that involved Vodacom’s acquisition of a 24.5 per cent stake in HTA.

HTA, which also operates in Ghana and the Democratic Republic of Congo, is planning to invest up to $450 million in the Tanzanian project.

African mobile operators are increasingly turning to tower leasing companies like Eaton Towers and HTA as they seek to slash their operating costs and free up funds for deployment to other capital intensive projects.

For example last year, Telkom Kenya signed a 15-year tower management deal with Eaton Towers.

Under the arrangement, the Kenyan operator would retain ownership of its existing portfolio of more than 1,000 towers while Eaton Towers would invest in passive infrastructure upgrades and build new towers to provide the telco with improved coverage and network quality.

“The partnership will place us in a strong position to expand our network and develop innovative new services, particularly in rural areas,” said Mickael Ghossein, CEO of Telkom Kenya.

In 2012, Eaton Towers, acquired 400 towers from Warid Telecom Uganda — which has now been acquired by Airtel. Another company, IHS, acquired some 540 towers from MTN Rwanda last year.

The move by telecom companies to lease or share infrastructure is driven largely by the fact that owning it may not always make business sense. Building towers in far-flung areas, for example, can be particularly costly.

On average, the cost of building a tower in Africa is about $200,000, but analysts say leasing one can help cut the amount by almost half. And as telecom companies extend their network reach, geographical coverage is becoming less of a competitive advantage. Tower-sharing will allow them to shift their focus to network quality by cutting operational costs.

Tower-sharing is low

However, tower-sharing on the continent remains low. For example, Eaton estimates that less than 10 per cent of Africa’s towers — projected at 175,000 by Deloitte — are shared, a ratio that compares poorly with advanced markets, where companies like Verizon in the US own no towers.

READ: Tower sharing grows, costs stay high

But operators now increasingly have to share infrastructure. For one thing, regulators are enacting new laws forcing telecom operators to share their infrastructure.

For example, the Communications Authority of Kenya (CAK), is working on a National Roaming Regulation that will allow users to make use of any network, no matter where they are in the country. CAK has also set at least 14 conditions that mobile company Safaricom and Airtel have to meet in the quest to acquire the troubled yuMobile’s assets.

The most controversial of them is the demand that Safaricom must share its money transfer and Sim card registration centres with its rivals. Safaricom intends to acquire yuMobile’s infrastructure, while Airtel wants to acquire the firm’s 2.7 million subscribers by taking over the mobile number prefix, potentially increasing competition in the sector.

With penetration levels in urban areas reaching maturity and considering that 60 per cent of the African population lives in rural areas, operators are finding it necessary to open up to infrastructure-sharing.

“Differentiating on price is a core element of African operators’ tactics as markets mature and as they reach out to niches and the low end market,” says Deloitte in a research report released last month titled The Future of Telecoms in Africa.

In Tanzania, the planned completion of a $700 million national fibre optic backbone, which is expected to link all district headquarters countrywide by 2015, will see a significant reduction in overall mobile phone call and Internet costs, accelerate economic growth and help stimulate innovation in key sectors. 

The government is encouraging mobile phone service providers to upgrade to fourth generation long-term evolution (4G LTE) network platforms to improve broadband access.

Already broadband providers such as Smile Communications Tanzania, a subsidiary of Johannesburg-based Smile Telecoms Holdings, and mobile phone providers such as Vodacom Tanzania, have been licensed for 4G LTE platforms, making Tanzania one of the first countries on the continent to launch the service.

ALSO READ: Smile’s 4G Mi-Fi device brings Kampala up to speed

However, operating mobile phone communication towers in Tanzania is the single most expensive item due to unavailability of electricity in most parts of the country, according to Mike Mushi, a Dar es Salaam-based Internet entrepreneur.

Companies are forced to lease or sell tower assets to third-party infrastructure companies to facilitate sharing of multiple networks and increase network coverage.

By David Mugwe, Peterson Thiong’o and Erick Kabendera