Helios Towers has shelved its initial public offering (IPO) plans, just days after the firm said preparations were well advanced.
The mobile infrastructure group, whose tenants include MTN Ghana and Vodacom Tanzania, was planning an IPO in London and on the JSE for early April.
While there was "considerable" investor interest, Helios said on Thursday that shareholders had decided not to proceed with the IPO.
Its shareholders include Millicom, Bharti Airtel and hedge funds Albright Capital Management and Soros Fund Management, among others.
Mergermarket reported on Wednesday that Helios and Eaton Towers – another IPO candidate – may have been eyeing a merger.
Mergence Investment Managers portfolio manager Peter Takaendesa said earlier in the week demand for Helios shares could have been strong.
"We expect strong demand for the shares if listed at appropriate valuation measures that compare well with other listed emerging market peers and are reflective of current global equity markets valuations," Takaendesa said.
Helios would have been the first tower company to list in SA. "We’ve got good momentum [in terms of preparations]," chief commercial officer Alexander Leigh told Business Day on Tuesday this week.
African tower companies are also still at early stages of their growth phase
Helios had wanted to have at least a quarter of its shares freely traded post the IPO, he said. "Where that sits between the two exchanges will be a product of the processes of speaking to investors and bankers."
The IPO would have given existing shareholders the chance to offload some of their stakes to local investors. Helios would not have received any proceeds from the offer, Leigh said, but it would have broadened its funding options.
Ownership among South African investors was low, although "we anticipate a large amount of demand", he said.
"I think SA has always been a market that understands the African growth story," he said.
Helios has bought or built about 6,500 towers in Africa, with its two biggest markets being Tanzania and the Democratic Republic of the Congo (DRC). It also operates in Ghana and Congo Brazzaville.
While capital expenditure was forecast to reduce, the company planned to add more towers and was considering entering new markets.
"There’s a huge organic opportunity. We anticipate that over the next few years, [there will be] over 12,000 new points of service in our markets – we’ve got to make sure that we capture that," said Leigh.
Takaendesa said other Africa-focused tower companies were expected to list in 2018, including IHS, which is 29% owned by MTN.
MTN values its stake at about R27bn and has said it could sell down its ownership.
Takaendesa said tower companies often generated "solid cash flows", while they also had annual inflation adjustments in their contracts with customers and relatively stable returns on invested capital.
"African tower companies are also still at early stages of their growth phase as most towers are still owned by mobile operators – especially in SA – and the trend towards shared infrastructure is gaining momentum," he said.
Mergence calculates that Helios grew revenues by 30% a year over the past three years while operating profits grew at "about double that rate" as the business scaled.
"There are risks related to their country exposure, with the DRC and Tanzania contributing over 80% of the company’s revenue. However, the risk-reward profile can be taken into account when they price the IPO."