Pressure mounts on MTN affiliate IHS on governance

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 29 Jun 2023

Another investor has lambasted MTN affiliate IHS Towers over governance issues at the tower infrastructure firm.

Yesterday, IHS shareholder Blackwells, which owns 12% of shares in the firm, sent a scathing letter to the IHS board of directors, demanding that the company address several governance issues.

The Blackwells letter follows South African-headquartered MTN earlier this month accusing IHS of wilfully breaching the shareholders’ agreement and articles over voting powers.

Earlier this month, reports emerged that the IHS annual meeting devolved into a tense standoff over investor power, after the tower operator dismissed demands from two of its largest stakeholders.

Wendel and MTN, which together own about 45% of the company, argued that all shareholders with at least a 10% stake should have the power to nominate board members. However, the IHS board dismissed the proposals.

MTN, through its subsidiary Mobile Telephone Networks (Netherlands), holds approximately 85.2 million (26%) of IHS shares.

Founded by Sam Darwish, IHS Towers is one of the largest telecommunications infrastructure providers in Africa, Latin America and the Middle East by tower count, and the fourth-largest independent multinational tower company globally.

In June last year, IHS Towers completed the acquisition of over 5 000 MTN towers in SA, in a deal that saw the New York Stock Exchange-listed tower company fork out R6.4 billion.

IHS Towers now owns 70% of MTN SA’s towers business, with the remaining 30% owned by a B-BBEE consortium.

Board overhaul calls

In a strongly-worded letter to the IHS board, Jason Aintabi, founder and chief investment officer of Blackwells, says his firm is a significant, long-term shareholder of IHS.

“As you are aware from prior discussions, we have expertise in the telecommunications industry and related infrastructure, as well as a demonstrated track record of helping companies to enact value-enhancing change.

“Unfortunately, we have suffered a substantial diminution in the value of our investment, as IHS shares have fallen by a staggering 60% since the company’s initial public offering in October 2021.”

He adds that Blackwells believes, that among other actions, the IHS board needs to be reconstituted as a precursor to necessary changes at the company.

Blackwells will take all necessary steps to overhaul the current board in the event the status quo persists, Aintabi adds.

He alleges IHS’s stock price remains low in substantial part because it refuses to embrace transparency with investors and corporate governance standards that more align with the norms of companies listed for trading on US securities markets.

“We infer that Blackwells is not alone. Through recent press reports, Blackwells has learned that two of the company’s largest shareholders, MTN and Wendel, have put forward proposals that would enable shareholders with at least a 10% stake in the company to seek board representation.

“The proposals suggest that even some of the company’s most substantial shareholders are concerned the company does not adhere to basic corporate governance norms. And that suggestion is confirmed by the astonishing fact that, according to press reports, the board dismissed the MTN and Wendel demands to put their proposals to a vote at its recent annual meeting.

“It speaks volumes about where IHS and its board stand on corporate governance and basic shareholder rights that shareholders with this large ownership interest are rebuffed in a manner even more dismissive than the brush-off Blackwells received last year.

Evaluating options

Given the ownership position of MTN and Wendel, Blackwells says it infers these shareholders did not raise their proposal concerning board representation for the first time at the annual meeting.

“It strains credulity to suggest the proposals (and no doubt other matters these significant owners raised with management) were not fully vetted before the annual meeting; yet the board refused to put the proposals to a vote.

“Indeed, it appears IHS management failed to give notice of these shareholders’ proposed resolutions, despite provisions in the IHS shareholders’ agreement that seem to require the company to notify all shareholders of additional agenda items subject to shareholder vote within five days of receiving notice of the agenda items from two or more of the shareholders subject to the agreement – shareholders parties to the agreement that include MTN and Wendel.

“And the predictable result: MTN has announced it is ‘evaluating its options’ with the intention of fully enforcing its rights under the shareholders’ agreement and the company’s articles of association.

“Yet rather than engage with MTN, the company is now reportedly preparing to defend against a hostile takeover – an effort that promises only to divert management and the board further from responding to the company’s apparent financial and operational problems.”

IHS recently told ITWeb that by disagreeing with MTN’s proposals, it wants to maintain its independence from the mobile operator.

In a short statement to ITWeb following the Blackwells letter, the company says: “The IHS Towers management team and board of directors have a continued track record of engaging with shareholders, listening carefully to their views and are focused on acting in the best interests of all shareholders.

“We note the recent comments made by certain of our shareholders and we continue engaging in shareholder dialogue.”

Click here to read the full Blackwells letter.