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Tower deals – building Africa's communication capability
Published on 12 May 2015
By Chris Tredger
It is a good time to be...
In Nigeria, MTN sold 9,151 base stations to IHS and Etisalat, Nigeria's third largest mobile
operator, sold over 2 000.
MT...
Today, the situation is different, and while regions differ in terms of willingness to share and
control resources, Darwis...
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Mohamad Darwish, founder and deputy CEO of IHS Nigeria, comments on booming tower outsourcing market

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Now is a good time to be in the African connectivity and telecoms services business. Consumer demand for mobile and data is not only fuelling investment in communication tower construction and management, but also forcing network operators and service providers to enhance their service quality levels.

Countries like Zambia have embarked on intensive plans to construct mobile communication towers nationally, also paying close attention to rural areas and the requirements of areas with limited connectivity. The phased project is already in place and aims to ensure the construction of over 200 towers.

The tremendous growth opportunity throughout the African telecommunications sector has drawn interest and investment from global operators such as mobile communications infrastructure services provider IHS Towers for which business is booming.

Financing is sourced from the acquisition and management of passive tower infrastructure from operators, as well as the construction of its own towers and leasing this infrastructure back to operators. This arrangement is designed to help operators with expansion, to facilitate greater access to available power and address logistic issues. The recent deals with Etisalat and MTN are good examples, says Mohamad Darwish, deputy Chief Executive Officer of IHS Nigeria and one of the company's founding members.

Darwish says the business has increased the overall number of telecommunication towers, both managed and self-constructed, in its portfolio to 25,000 – 15,000 of which are located in Nigeria. “It is a competitive and active market” says Mohamad Darwish, “with just one of the business drivers being the shift towards independent tower ownership. The drive comes from two parts, number one from the operators themselves...everybody wants to bring down costs, so cost reduction is one and when it comes to tower sharing fits that profile perfectly."

IHS is also concentrating on driving down the cost of renewable power solutions to reduce the consumption of diesel for example, which makes up approximately 70% of the company's operating expenses, as well as on stabilising the business during the transition from the operator to IHS on sites, as well as expansion into Africa.

"It is a capital intensive business... when it comes to acquiring portfolios, you have, in a way, to follow the operators. We try as much as possible to make a case to operators to outsource... but it actually has to come from them, they have to make a decision," says Darwish.

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Mohamad Darwish, founder and deputy CEO of IHS Nigeria, comments on booming tower outsourcing market

  1. 1. Tower deals – building Africa's communication capability Published on 12 May 2015 By Chris Tredger It is a good time to be in the telecommunications and connectivity services business in Africa. Consumer demand for mobile and data is not only fuelling investment in communication tower construction and management, but forcing network operators and service providers to up their levels of service quality. Countries like Zambia have embarked on aggressive plans to construct mobile communication towers nationally, also paying specific attention to rural areas and requirements. The phased project is already in place and seeks to ensure the construction of over 200 towers. Growth opportunity in this area of telecommunications in Africa has attracted interest from global operators like mobile communications infrastructure services provider IHS Towers. In 2014 the pan-African company made headlines after it raised $2.6 billion in equity funding, and also cemented deals with established operators MTN and Etisalat. READ MORE Africa phone tower firm IHS raises $2.6 billion ‘Nigeria to reach 75% independent tower ownership’ MTN Nigeria in mega deal to sell 9,151 towers Etisalat Nigeria sells 2,136 towers to IHS
  2. 2. In Nigeria, MTN sold 9,151 base stations to IHS and Etisalat, Nigeria's third largest mobile operator, sold over 2 000. MTN and IHS said in a joint statement at the time, "IHS will have full operational control of the underlying business. The new towers company will market independent infrastructure sharing services to other mobile operators and Internet Service Providers (ISPs) in Nigeria." The West African country is IHS' biggest market, in terms of volume and the size of its economy. However, the company has also established presence in Cameroon, Ivory Coast, Rwanda and Zambia over its fifteen years in operation. From its stronghold in Nigeria, the company continues to leverage its core value proposition: tower infrastructure sharing and leasing. Revenue is sourced from the acquisition and management of passive tower infrastructure (excluding transmission equipment) from operators, as well as the construction of its own towers and leasing this infrastructure to operators. This arrangement is designed to help operators with expansion, to facilitate greater access to available power, and address logistic issues. The deals with Etisalat and MTN are examples, says Mohamad Darwish, deputy chief executive officer of IHS Nigeria and one of the company's founding members. He says the business has increased the overall number of telecommunication towers, both managed and self-constructed, in its portfolio to 25,000 – fifteen thousand of which are located in Nigeria. It is a competitive and active market says Darwish, with just one of the business drivers being the shift towards independent tower ownership. "The drive comes from two parts, number one from the operators themselves...everybody wants to bring down costs, so cost reduction is one and when it comes to tower sharing fits that profile perfectly." In this scenario the operator outsources the management of tower infrastructure and all the associated responsibilities, including power supply and sustainability, maintenance etc. Anchoring the business Other business drivers including service providers having to meet a growing consumer demand for mobile access, connectivity, broadband and data, as well the growth of LTE networks. This is pushing demand for mobile and connectivity access services, says Darwish. "As an independent tower company, that's where we come in ... that is our bread and butter business, so that the client can focus on their core business," he adds. IHS Towers finds itself in an advantageous position within the market. Darwish says five years ago it was tougher to pitch leasing as a business model because of sensitivity around sharing infrastructure amongst competitors.
  3. 3. Today, the situation is different, and while regions differ in terms of willingness to share and control resources, Darwish explains that generally there is a better understanding of the practicalities behind tower asset sharing. Looking ahead Darwish says the funds raised towards the end of last year, representing a combination of equity funding and debt, is being used to support the acquisition of portfolios. The company is also concentrating on driving down the cost of renewable power solutions to reduce the consumption of diesel for example, which makes up approximately 70% of the company's operating expenses, as well as on stabilising the business during the transition from the operator to IHS on sites, as well as expansion into Africa. "It is a capital intensive business... when it comes to acquiring portfolios, you have, in a way, to follow the operators. We try as much as possible to make a case to operators to outsource... but it actually has to come from them, they have to make a decision," says Darwish. Despite relatively high barriers to entry, there are competitors in the market – but, according to Darwish, few that operate on the same level in the regions and markets IHS covers. For now the company will focus on its expansion plans and the smooth integration of new towers and new portfolios into the company and its culture, whilst also ensuring access to a high availability network. Although the company cannot specify which markets it will target next, South Africa is viewed as being strategic. When it comes to regions and potential business alliances, it is an operator-driven process Darwish adds - See more at: http://www.itwebafrica.com/telecommunications/335-africa/234609-tower- deals-building-africas-communication-capability#sthash.tPyTj7d1.dpuf

Now is a good time to be in the African connectivity and telecoms services business. Consumer demand for mobile and data is not only fuelling investment in communication tower construction and management, but also forcing network operators and service providers to enhance their service quality levels. Countries like Zambia have embarked on intensive plans to construct mobile communication towers nationally, also paying close attention to rural areas and the requirements of areas with limited connectivity. The phased project is already in place and aims to ensure the construction of over 200 towers. The tremendous growth opportunity throughout the African telecommunications sector has drawn interest and investment from global operators such as mobile communications infrastructure services provider IHS Towers for which business is booming. Financing is sourced from the acquisition and management of passive tower infrastructure from operators, as well as the construction of its own towers and leasing this infrastructure back to operators. This arrangement is designed to help operators with expansion, to facilitate greater access to available power and address logistic issues. The recent deals with Etisalat and MTN are good examples, says Mohamad Darwish, deputy Chief Executive Officer of IHS Nigeria and one of the company's founding members. Darwish says the business has increased the overall number of telecommunication towers, both managed and self-constructed, in its portfolio to 25,000 – 15,000 of which are located in Nigeria. “It is a competitive and active market” says Mohamad Darwish, “with just one of the business drivers being the shift towards independent tower ownership. The drive comes from two parts, number one from the operators themselves...everybody wants to bring down costs, so cost reduction is one and when it comes to tower sharing fits that profile perfectly." IHS is also concentrating on driving down the cost of renewable power solutions to reduce the consumption of diesel for example, which makes up approximately 70% of the company's operating expenses, as well as on stabilising the business during the transition from the operator to IHS on sites, as well as expansion into Africa. "It is a capital intensive business... when it comes to acquiring portfolios, you have, in a way, to follow the operators. We try as much as possible to make a case to operators to outsource... but it actually has to come from them, they have to make a decision," says Darwish.

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