In a deal that gives shared telecommunications infrastructure specialist IHS Towers a big foothold in South Africa and operator MTN a massive boost to its balance sheet, IHS is acquiring a large number of telecommunication towers from the South African giant.
IHS Towers describes itself as one of the largest independent owners, operators, and developers of shared telecommunications infrastructure in the world by tower count. With the agreement to acquire 5,709 telecommunication towers in South Africa from MTN it is now even larger.
On top of the tower sale IHS Towers will also provide what is called power-as-a-service (PaaS) to MTN at approximately 12,800 sites across South Africa (including the acquired 5,709 sites).
The cash consideration in the transaction is ZAR6.4 billion (about $412 million). IHS says that the acquired assets as well as the provision of PaaS across MTN’s portfolio are expected to deliver revenue and adjusted EBITDA of approximately $220 million and $80 million respectively in the first full year of operations based on a current exchange rate. Further growth is expected through a multi-year commitment for a portion of MTN’s new towers.
IHS Towers already has a big presence in Africa. Now it will become the largest independent tower operator in South Africa.
MTN says that the transaction will enable it to service its retail and wholesale clients more efficiently while creating substantial value, as reflected in the proceeds realised. These proceeds, it adds, will be reinvested into strategic growth initiatives, such as securing high demand spectrum frequencies, and providing MTN with additional balance sheet flexibility.
As for MTN’s rivals, recent news reports have suggested that Vodacom Group plans to spin off its South African telecommunications tower portfolio into a separate business and may seek partners for the newly created entity. However, Vodacom isn’t expected sell its tower portfolio, which it apparently views as a strategic asset.