A man passes an MTN board in Lagos, Nigeria. Picture: AFP PHOTO/PIUS UTOMI EKPEI
A man passes an MTN board in Lagos, Nigeria. Picture: AFP PHOTO/PIUS UTOMI EKPEI

MTN has swapped its 51% stake in Nigeria Tower InterCo for additional shares in tower management company IHS Holdings, in a deal that will simplify its tower investments and reduce exposure to currency volatility.

IHS manages more than 23,300 cellphone towers across Africa, Europe and the Middle East. MTN and IHS formed Nigeria Tower InterCo in 2014, which subsequently bought MTN Nigeria’s 8,850 towers.

MTN owns a 15% stake, valued at R11.4bn, in IHS Group.

As part of the deal, MTN’s shareholding in IHS will rise to 29% but the group will still have no board representation.

There are also restrictions on access to information as IHS manages towers used by cellphone network operators that are also competing with MTN in some markets.

Cellphone network operators are outsourcing passive infrastructure such as towers to third parties to raise money and reduce costs of running such assets.

Mergence Investment Managers portfolio manager Peter Takaendesa said shifting its shareholding to the IHS group "appears quite sound for MTN as it diversifies their investment and makes it much easier to sell the stake to existing partners or third parties should MTN decide to do so in the future".

Given the restrictions that come with the deal, Takaendesa said this was "clearly a passive investment for them and very likely to be sold over time".

He said the transaction would also reduce currency related earnings volatility for the MTN group due to a change in accounting treatment of its shareholding in Nigeria Tower — these had resulted in a net loss of R2.5bn in the six months to June 2016.

MTN’s stake in Nigeria Tower InterCo had a carrying value of about R4.6bn.

MTN Group executive chairman Phuthuma Nhleko said the deal "simplifies our ownership structure and diversifies our tower investments across the IHS Group".

He said IHS was "extremely well positioned for future growth and build-out from
3G upgrades and the move to LTE [long-term evolution] across its key markets".

IHS will also accelerate MTN’s network expansion in markets, such as Nigeria,
where it had suffered massive setback recently.

IHS Group CEO and executive vice-chairman Issam Darwish said the group would accelerate the development of critical telecommunications infrastructure across Africa.

In 2016, IHS bought rival Helios Towers Nigeria, which gave it just more than 1,200 towers in Nigeria.

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