MTN’s decision to acquire 100% of IHS Towers marks a strategic shift away from the asset-light model. Experts suggest this is driven by unique circumstances, not a broader industry trend. The deal will allow MTN to restructure its balance sheet and internalize margins, but other operators are unlikely to follow suit. Market conditions and regulatory environments will continue to shape infrastructure strategies.
The recent decision by MTN to fully acquire IHS Towers, encompassing all outstanding shares, represents a significant shift in its strategic direction, departing from the asset-light model it had previously embraced. However, according to leading industry analysts, this move is unlikely to signal a widespread trend across the telecommunications sector.
While MTN’s decision may seem counterintuitive, industry experts suggest it stems from a unique set of circumstances specific to the relationship between MTN and IHS, rather than a fundamental change in the industry’s approach to infrastructure ownership. Over the past decade, many telecommunications companies globally, including those in South Africa, have pursued asset-light strategies. This involved selling off their tower infrastructure to specialized companies, such as IHS Towers, to unlock capital for crucial 5G deployments and streamline operational processes. Companies like Vodafone Group and AT&T have successfully implemented similar strategies, highlighting the industry-wide adoption of this approach. The rationale behind asset offloading often includes the conversion of physical assets into readily available capital. Furthermore, operators often experience an increase in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) as lease obligations, which previously impacted financial performance, transition to being reflected as depreciation and amortization. This transition can positively influence a company’s valuation, making it appear more financially robust.The specific factors influencing MTN’s decision to acquire the remaining 75.3% of IHS Towers it didn’t already own, in a deal valued at R35.3 billion, are multifaceted. MTN already held a 25% stake in IHS, and significant long-term lease obligations between the two companies likely played a key role. The acquisition allows MTN to address these lease liabilities and potentially restructure its balance sheet. The transaction is contingent on IHS divesting its Latin American assets, comprising approximately 8,860 sites, which will be sold to Macquarie Asset Management for $952 million. Following this sale, MTN will gain control of approximately 29,000 towers across five key African markets: Nigeria, South Africa, Zambia, Cameroon, and Ivory Coast, all markets where MTN has a significant operational presence. The reintegration of the tower infrastructure will lead to an increase in assets on MTN’s balance sheet and the elimination of those long-term lease liabilities. Another benefit highlighted by MTN is the internalization of profit margins previously paid to IHS. Beyond these financial considerations, non-financial drivers may also be motivating the proposed deal. For example, despite being the largest shareholder in IHS, MTN’s voting rights were limited due to the tower operator’s corporate structure. MTN has also faced challenges regarding its tower leases, particularly in Nigeria, where currency volatility has created an unstable macroeconomic environment over the past three years. In 2024, MTN renegotiated its lease contracts with IHS to mitigate this risk, increasing the proportion of Naira-denominated costs and reducing its exposure to the US dollar.Industry analysts and experts are skeptical about whether MTN’s move will inspire other mobile operators to buy back their outsourced tower infrastructure, suggesting it is highly unlikely. Any such decision, experts believe, will be made on a country-by-country basis. The financial implications are significant, as such acquisitions require substantial capital and a robust balance sheet. Market conditions and regulatory environments also vary significantly across different regions, and this demands a variety of strategic approaches to infrastructure. Vodacom, a major competitor of MTN, has also adjusted its strategies for masts and towers, particularly in South Africa. However, unlike MTN, Vodacom’s strategy in South Africa has not involved full disposal of towers. Instead, in 2022, Vodacom South Africa unveiled plans to internalize a part of its tower operations. In contrast to South Africa, in markets such as the Democratic Republic of Congo (DRC), where vast distances, challenging terrain, and sparse rural populations make infrastructure deployment particularly expensive, Vodacom and Orange have chosen a collaborative approach, sharing resources and infrastructure. In certain regions, favorable government policies are driving infrastructure ownership decisions. In Egypt, for example, incentives such as eased licensing, tax deductions, and support for local equipment manufacturing have incentivized Vodacom Egypt to own its infrastructure instead of employing an asset-light strategy. Market structure and competitive positioning also influence strategy. In South Africa, Cell C, the smallest of the four mobile operators, found operating its own masts and towers a cost-intensive endeavor relative to its size
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