IHS eyes Africa tower sales to cut debt

IHS Holding is working on a possible sale of its tower assets in Zambia and Rwanda as part of a broader debt-reduction drive, it emerged this week.

Mary Lennighan

August 22, 2024

3 Min Read

The company, which operates a portfolio of mobile towers across the Middle East and Africa, as well as in a couple of key Latin American markets, plans to gauge interest in the aforementioned businesses from potential buyers, Bloomberg reported on Wednesday, citing the usual unnamed sources.

The newswire did not have many details to share; we have no idea how much IHS might be looking to raise from the sale, for example. But its sources did note that some of the proceeds – should any asset sales take place – would be used to pay down debt.

That tallies with IHS's ongoing strategic plan, in which debt-reduction is a key element. Indeed, asset sales in general have been on the cards for some time, the firm having revealed earlier this year that it would undertake a strategic review of its businesses and capital allocation priorities. At its second quarter results announcement last week IHS confirmed that the review is still taking place and further hinted at business disposals.

"In terms of assets review, we continue to examine our portfolio of markets with a focus on raising proceeds with a target of $500 million to $1 billion," said IHS chairman and CEO Sam Darwish. "Finally, regarding capital allocation, we continue to expect that proceeds from those initiatives will be used primarily to pay down our debt; however, we will also consider deploying excess proceeds through share buybacks and/or introducing a dividend policy," he said.

Selling out of Zambia and Rwanda would contribute to that financial target, should IHS succeed in brokering a deal it is happy with. Bloomberg said deliberations are still at an early stage and the company may still decide to hang on to the assets, at least for now.

IHS has close to 1,900 towers in Zambia and just under 1,500 in Rwanda out of a portfolio of approximately 40,000 across its whole business. The majority of its assets are in Africa and the Middle East, but it has just north of 8,000 towers in Latin America, the vast majority being in Brazil.

Zambia and Rwanda form part of IHS's Sub-Saharan Africa division, which contributes around a quarter of group revenues.

The company's financials have not looked particularly rosy in recent quarters as a result of a currency devaluation in Nigeria, its biggest single market, which accounts for as much as two third of its top line. In Q2 this year the impact of the Naira devaluation was less keenly felt than in previous quarters, but nonetheless group revenue still dropped by more than 20%, in no small part due to the Nigerian business. Sub-Saharan Africa was also an issue in Q2 though, its revenue falling by 12%, both due to an organic slide and also forex effects.

The quarter also saw the towers firm renew contracts in key markets with major customer MTN, Rwanda included, as well as put to bed certain governance issues it had with the telco, which holds a 26% stake in IHS. That is, of course, good news for IHS, bringing back some certainty to its business. But there will be a financial hit: as a result of the contract renewals, whose terms were clearly less favourable, IHS has reduced its full-year guidance, although it is keen to point out that its capex plan is unchanged.

Essentially, like many of its peers in the passive infrastructure space, IHS is working hard to keep spending down and reduce leverage. And against that backdrop, asset sales have got to be a tempting prospect.

About the Author

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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