In a deal said to be worth close to R20 billion, MTN Nigeria has signed an agreement with IHS Holdings for the transfer of its towers business, comprising 9 151 mobile network towers, to the latter, in the West African country.
MTN - Africa's largest mobile operator - said this morning the transaction is expected to reduce MTN Nigeria's operating costs, drive network efficiencies and further expand MTN's voice and data capacity.
While the value of the deal has not been revealed, Reuters quotes a source familiar with the transactions as saying the sale was worth around $1.8 billion.
In terms of the deal, the towers would be transferred to a new company, which will be owned jointly by MTN and IHS, with IHS having full operational control of the underlying business. The transaction essentially doubles the size of the IHS business.
The new towers company will market independent infrastructure sharing services to other mobile operators and Internet service providers (ISPs) in Nigeria. The transaction - currently subject to regulatory approval - is expected to be finalised in the fourth quarter of this year.
"We are delighted to have entered into a further transfer transaction with IHS, in our largest African market. IHS' deep knowledge and considerable experience in the sector will help drive efficiencies and enhance our network uptime, allowing us to concentrate on further raising our own service levels, improving the customer experience and ensuring we remain the number one operator in Nigeria," says Sifiso Dabengwa, group president and CEO of the MTN Group.
Additional investment
This is the ninth tower transaction for IHS and its fifth with MTN following the transactions in Cote d'Ivoire, Cameroon, Rwanda and Zambia that took place in 2012 and 2013. On completion of the MTN deal, IHS will manage more than 20 000 towers in Africa.
The MTN transaction follows a deal last month between Etisalat Nigeria and IHS, involving the sale of 2 136 of Etisalat's towers. At the time, Etisalat said the deal was part of a strategy to drive improvements in the quality of its network performance and to accelerate the deployment of 2G and 3G coverage and new services.
As part of the MTN deal, the new towers company has committed more than $500 million of additional investment, over four years, into tower upgrades and a maintenance programme to improve quality of service and enhance the customer experience on the MTN Nigeria network.
In addition, further investments will be made into IHS' centralised network operations centre in Nigeria, to optimise operations and increase IHS' network uptimes of over 99%. There will also be sustained investments in energy-efficiency through the deployment of advanced generators, batteries and alternative power solutions to reduce diesel consumption. IHS anticipates creating a considerable number of technical and engineering direct and indirect employment opportunities to be sourced locally in Nigeria.
Transformational agreement
MTN Nigeria CEO Michael Ikpoki says the separation of MTN Nigeria's mobile network towers and operation of the underlying towers business by IHS reflects a major part of the company's strategy to optimise network quality and technological assets. "Indeed, the trends and realities in our industry reveal the increased role of cost-efficiency and optimisation of assets in guiding business decisions in order to remain competitive.
"We will continue to embrace strategies that enhance our services to our customers while ensuring our long-term business continuity, without compromising best practice."
IHS Holdings CEO Issam Darwish comments: "This is a significant and transformational agreement for IHS that doubles the size of our business and confirms our position as the leading mobile infrastructure company in Africa.
"It gives me great pleasure to be agreeing this deal with MTN, a partner we have worked with for more than 10 years and with whom we have an excellent relationship. I am confident that MTN's customers and management will benefit almost immediately from IHS' focus on quality of service, innovative tower management and sustainable energy approach."
The deal is important for MTN and is a natural progression of how telecoms operators are starting to do business in developing markets, says Ovum analyst Richard Hurst. However, he warns this type of deal does take some of the competitive advantage away from operators.
"Selling towers to IHS means you are essentially giving away part of your business, and your competitors - who are doing the same - end up with the same coverage as you. This means these operators have to find other ways of competing against each other, such as cost-efficiency or additional services."
According to Nigeria's telecoms regulator, MTN Nigeria has a 46% share of the country's mobile subscribers, compared to India's Bharti Airtel with 20%, Globacom with 19% and Etisalat Nigeria with 15%.
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