Telcos sell off towers in Africa to improve balance sheets

Monday May 21 2018

Over the past three years, there have been

Over the past three years, there have been tower sales deals worth more than $6 billion across the continent. FILE PHOTO | NATION 

ALLAN OLINGO
By ALLAN OLINGO
More by this Author

Telecommunications companies across Africa have in the past three years sold off their tower businesses to concentrate on their core business and improve their balance sheets.

So far, there have been tower sales deals worth more than $6 billion across the continent as telecommunications try to cut costs by divesting from infrastructure to focus on service delivery.

Africa has more than 120,000 towers, about 46 per cent of which are owned by independent firms — a significant increase from three per cent 10 years ago.

Only last week, American Tower Corporation (ATC) reached an agreement to acquire 723 telecommunications towers held by Telkom Kenya for an undisclosed amount of money.

This disclosure came as Indian telecommunications giant Bharti Airtel, which has sold off its tower business on the continent, said that it will be listing a quarter of its African operations to raise $1.5 billion as it seeks to reduce its debt load of $14.6 billion.

The ATC deal, which is expected to be completed in the first half of this year, will give the multinational a presence in Kenya, nearly a decade after making its foray into East Africa through similar acquisitions in Uganda and Tanzania.

Advertisement

The deal comes five years after a similar transaction between Telkom Kenya and Eaton Towers, for the passive management of 1,000 towers.

In East Africa, Tanzania has the highest number of towers at 8,800, followed by Kenya at 6,800, Uganda with 3,485 towers and Rwanda at 1,600, data from TowerXchange, an association of the world towers sector shows.

Bharti Airtel last year exited the tower business altogether, divesting from its telecom tower company Bharti Infratel.

The sale of the towers was one of the reasons the telecom giant’s losses in Africa narrowed to $91 million in September 2016, compared with  $170 million during the same period in 2015, with revenues of $3.4 billion, or 1 per cent increase.

Billion revenue

In 2016, the telecom booked a $2 billion revenue from the sale of its 8,300 towers in the nine African countries, including in Kenya and Rwanda, while the agreement to sell towers in four other countries lapsed. This was part of its 14,000 towers on the continent, with the proceeds used in settling part of its $13 billion debt.

“We have constituted a committee to look into this tower divestment issue. We have received offers, we don’t know whether we want to sell minority or take up a controlling share. The committee will go through the proposition and make a recommendation. We will then make a decision,” Airtel chairman Sunil Bharti Mittal said at the time.

Two years ago, the region’s largest telecommunications firm Safaricom, through East Africa Tower Ltd acquired more than 400 towers from Yu mobile’s Essar Mobile Ltd, an indication of how lucrative the business had become.

For tower operators like ATC, Helios Towers, Eaton and IHS Towers, the renting/leasing business removes the stress from telecommunications firm.

The firms are now offering the full service model, where they create a portfolio of properties in a region, then rent these to telcos.

In an ideal setup, the tower operators manage the workers at these sites who include drivers, security guards and maintenance workers, while the telecommunication firms that rent the towers — which can house up to three tenants — then install their base stations.

Shared infrastructure

For the mobile operators, outside of an immediate cash injection benefit of tower sale, the option of having a shared telecoms infrastructure offers improved operating and capital efficiency, reduced costs, increased accessibility and better network quality of service for users.

“The acquisition and the decommissioning of duplicate tower infrastructure help operators meet growing consumer demand while ensuring network expansion is done in a sustainable and responsible way,” Helios Towers Africa Kash Pandya told The EastAfrican in an earlier interview.

Outside of Kenya, ATC manages 1,700 towers in South Africa, which it bought out from Eaton and Cell C; 4,800 towers in Nigeria and 1,305 in Tanzania sold by Airtel, 1,000 towers in Uganda and 1,876 towers in Ghana it purchased from MTN.

Helios Towers, which in March said it was looking at raising $2 billion through an IPO on the London and Johannesburg stockmarkets, now operates in the Democratic Republic of Congo (1,676 towers), Congo Brazaville (394 towers), Tanzania (3,800 towers) and Ghana (750 towers), whichit purchased from Airtel, Vodacom and Millicom/Tigo and Zantel.

Eaton Towers has operations in Uganda where it handles 700 masts it bought from Warrid and Orange. It also bought 750 towers from Vodafone in Ghana. It also struck a deal with Airtel in 2016 to buy 2,500 towers in Kenya, Uganda, Ghana and Burkina Faso.

IHS towers, Africa’s largest telecommunication towers company has its presence in Nigeria with 14,413 towers that it purchased from telecommunication firms including Hotspot, HTN Towers, Etisalat, MTN and Visafone.

The tower firm also has 2,382 towers in Rwanda and Zambia it bought from Airtel and MTN; and 3,757 towers in Cameroon and Ivory Coast that it bought from Orange and MTN.

Last month, Johannesburg listed MTN, which owns a 29 per cent stake in IHS Towers, said through its chief finance officer Ralph Mupita that it was looking selling out its stake upon the issuance of an IPO by valuing its stake at $2.3 billion.

The tower firm is owned by Wendel, a French investment firm and Goldman Sachs, an American investment bank.

Advertisement