It would quickly be 8 unicorns and depending on the African continent, following the effective listing of leading Africa-focused telecom facilities company, IHS Towers, on the New York Stock Exchange on Thursday (Oct. 14).
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The London-headquartered company has actually priced the sale of 18 million normal shares at a public offering rate of $21.00 per share, and the closing of the offering is anticipated to happen on Monday (Oct. 18).
According to its regulative filing, the business is intending to raise as much as $540 million from the going public (IPO) that might value it at about $8 billion, among the biggest ever for an Africa-focused company.
The towers company — whose financiers consist of Goldman Sachs, France’s Wendel and South African cordless provider MTN — was established in Nigeria in 2011 and is concentrated on structure, renting and handling mobile telecoms facilities for mobile network operators (MNOs).
The company is referred to as among the world’s biggest independent owners of mobile facilities, with a base of 365 million mobile customers and a portfolio of 30,000-plus towers in 9 markets: 5 in Africa, 3 in Latin America and one in the Middle East.
In Africa, tower companies like IHS play an important function in the digital economy, as the high expense of operating and handling tower websites — especially due to prevalent power interruptions throughout the area — makes it challenging for telecommunication business (telcos) and MNOs who are eager to minimize their operating expense and financial obligations.
And with the broadening mobile connection throughout the continent, the function of MNOs — and, by extension, tower business — will grow, permitting telcos to reach more individuals at a decreased expense.
According to GSMA’s 2021 Mobile Economy Report for Sub-Saharan Africa, deals on mobile cash platforms increased by 23% to reach $490 billion in 2020, an indication of how quick Africa’s digital economy is growing.
The report likewise approximates that 615 million individuals, comparable to 50% of the area’s population, will sign up for mobile services by 2025, with $155 billion of financial worth produced by mobile innovations and services by that exact same year.
In this piece, PYMNTS takes a better look inside the telecoms facilities business’s crucial function in Africa’s digital economy landscape, highlighting 5 things found in the analysis
1. IHS cancelled IPO strategies in 2018.
In 2018, IHS delayed an IPO in the U.S. that would have valued the business at as much as $10 billion, numerous news outlets, consisting of Bloomberg, reported at the time.
Among the primary factors provided for the hold-up was that the sale may happen too near an election in its house market of Nigeria, though the elections wound up happening in February 2019.
The business was among 3 Africa-focused telecom facilities groups to backtrack on an IPO that year, after Soros-backed Helios Towers and Eaton Towers likewise deserted their prepared listings. Helios Towers later on went on to raise $364 million in a 2019 London IPO
2. MTN, Africa’s mobile giant, is aiming to shed its 29% stake in IHS Towers.
As part of efforts to minimize financial obligation through property sales, the mobile giant had actually been aiming to offer its billion-dollar stake in IHS when it is noted openly. After missing out on that possibility in 2018, it means to go through with it this time around.
Back in 2017, MTN exchanged its 51% interest in Nigeria Tower InterCo, the moms and dad business of Nigerian telecom tower operator, INT Towers, for an increased shareholding in IHS Group. As an outcome of that deal, in which IHS acquired 8,850 towers from the telecom business, MTN’s interest in the IHG Group increased from 15% to 29% – valued at 30.5 billion rand (about $2.04 billion) since June this year.
“The deal represents a considerable action in MTN’s longstanding collaboration with IHS. It streamlines our ownership structure and diversifies our tower financial investments throughout the IHS Group,” Phuthuma Nhleko, then-MTN president and executive chairman, stated at the time.
3. Income is increasing, losses are diminishing.
In Between December 2019 and December 2020, the business understood a 14% year-over-year development, creating earnings of $1.23 billion and $1.4 billion in 2019 and 2020, respectively. Losses reduced by 24% throughout that duration, from $423 million to $323 million at the end of 2020.
And for the 6 months that ended June 30, 2021, earnings grew by 15% to $764 million, creating a revenue of $77 million, compared to a loss of $353 million throughout the exact same duration a year prior.
The Nigeria-based tower operator procedures earnings in 3 classifications: Organic earnings records the efficiency of its existing company; inorganic earnings determines the effect on earnings from existing renters of brand-new tower portfolios or organizations; and non-core earnings represents the effect of foreign exchange rates’ motions on its company operations.
4. A considerable part of its earnings is originated from a little number of MNOs.
According to IHS’ F-1 filing signed up with the Securities and Exchange Commission (SEC) ahead of the IPO, a considerable part of its earnings in each of the 9 markets where it runs originates from a little number of MNO customers, “who normally make up a few of the biggest MNOs in those markets.”
For instance, earnings from the company’s leading 3 MNO consumers jointly represented over 97% of its combined earnings in between 2018 and 2020, along with the 6 months that ended June 30, 2021. MTN Nigeria and Airtel Nigeria represented 55% and 10%, respectively, of its combined earnings for the 6 months ending June 30, 2021.
As the prospectus specified, depending upon such a little number of MNOs comes at a threat, and “must there be any unfavorable effect on business of our significant consumers, consisting of these crucial MNOs, this, in turn, might negatively impact their need for tower area and/or the capability to perform their commitments under their lease contracts with us.”
5. IHS has actually been extending its footprint throughout Africa, the Middle East and Latin America.
In February 2020, the company finished 2 significant acquisitions, one for Cell Website Solutions (CSS) in Brazil and a 70% stake in Zain Kuwait’s Telecom Towers Business, as part of its growth into Latin America and the Middle East.
In January of this year, IHS acquired another 1,005 towers in Brazil as part of the Skysites acquisition and 819 towers in Brazil and Colombia as part of the Centennial acquisition. And a couple of months later on in April, the company got a tower in Rwanda, including 162 towers and 283 renters to its growing portfolio.
Since June 2021, the telecom tower business boasts an overall of 30,207 towers and 45,487 renters, at a colocation rate of 1.51x.