Nigerian tower firm eyes East Africa

Mergers, Acquisitions and Financial Results

Safaricom and Telkom Kenya’s infrastructure sharing plan could get a boost following an announcement by Nigerian telecommunication towers company IHS that it is seeking Sh18 billion ($200 million) to finance its expansion strategy.

The Financial Times newspaper reported Monday that the mobile phone towers builder, which rents out its infrastructure, had appointed Citibank to raise the extra equity it needs to grow beyond Nigeria.

IHS said it was targeting lease contracts with East African market telecommunication operators. The firm said it was eyeing Kenya, Uganda Rwanda, Democratic Republic of Congo and South Africa in its new bid to increase footprint after a successful bid in Tanzania that saw it enter into a lease back contract with Tigo of Tanzania and Millicom of DRC.

It comes at a time Safaricom and Telkom Kenya are negotiating tower sharing deal that will see the two firms hand over their current infrastructure to an independent operator in a cost-cutting move. “Voice penetration is about 60 per cent across Africa but real penetration is about 10-15 per cent less than that. So there will be a massive growth in voice traffic that will need building to ensure more capacity, while data use is almost non-existent and will grow rapidly,” CEO Issam Darwish was quoted saying by the FT.

The firm, which is West Africa’s largest telecommunications infrastructure provider, wants to increase the number of mobile phone towers it owns to 2,000 next year from its current 850, according to the report. Some of the money will also be used to buy towers that are being sold by companies such as France Telecom in Uganda, the newspaper said.

Darwish put the total value of the African tower market at around $50 billion and estimated that Africa requires another 50,000 masts for voice and traffic data. Nzioka Waita , Safaricom’s Corporate affairs manager, Monday told the Business Daily the two firms are still negotiating a deal that will see them ride on each other’s infrastructure and lower their recurring costs and capital expenditure. Safaricom and Telkom Kenya have 4,000 towers between them. “The talks are still on but I cannot divulge much details due to the non-confidentiality agreement between the two firms,” said Mr Waita.

Regional mobile firms are turning to independent tower sharing companies to manage the facilities on their behalf in a bid to reduce capital and operational expenses in the competitive sector that has seen voice revenues shrink.

Tigo of Tanzania and Millicom of Democratic Republic of Congo set the pace of tower sharing last year after they entered into a tower leaseback agreement with Helios Towers Africa, an equity funded mobile tower operator.

Airtel on the other hand has outsourced its network management to Nokia Siemens and is said to be pursuing a similar strategy by Tigo and Millicom that may see it sell its towers to an independent company and then enter into a leaseback agreement with it.
Safaricom and Telkom Kenya’s arrangement, however, differs with that of Tigo and Millicom in that they are bringing in their towers as equity to the firm rather than selling them to a third party as in the case of Tigo and Millicom.

Helios bought the 1,180 telecoms towers from Tigo, the Tanzanian operation of South Africa’s Millicom International Cellular, in December 2010.

Tigo Tanzania will receive $80 million in cash upfront and retain a significant minority interest in the company. Helios Towers has also bought 729 towers from Millicom in the Democratic Republic of Congo.