Four years after MTN sold 5,701 South African cellphone towers to IHS Towers for R6.4 billion, the telecoms group is moving closer to taking control of the infrastructure company that bought them.
South Africa’s Competition Commission has recommended that the Competition Tribunal approve MTN’s acquisition of the IHS shares it does not already own, subject to conditions.
The transaction isn’t final. The Competition Tribunal must still rule on the deal and other regulatory clearances remain outstanding.
If completed, however, the acquisition would effectively bring thousands of towers across Africa under MTN’s control.
MTN’s $2.2 billion IHS deal
MTN already owns about 24.7% of IHS and has agreed to pay roughly $2.2 billion, or about R36 billion, for the remaining shares.
Around half of the purchase price is expected to come from IHS’s own cash.
IHS shareholders approved the transaction in August.
The two businesses are already closely connected.
IHS earns about 70% of its revenue from MTN, while MTN says IHS will have close to 29,000 African towers across five key MTN markets once its Latin American disposals are complete.
MTN sold 5,701 South African towers in 2022
The deal represents a significant shift in MTN’s infrastructure strategy.
In 2022, the group sold 5,701 South African cellphone towers to IHS for R6.4 billion and then leased space on those towers back.
The sale formed part of MTN’s asset-realisation programme, which was intended to strengthen its balance sheet.
The broader tower-company model allowed mobile operators to release capital tied up in physical infrastructure while specialist tower companies could lease space to multiple networks.
Four years later, MTN is making the case for bringing that infrastructure back under its control.
What MTN stands to gain from owning IHS
MTN argues that owning IHS would allow it to retain margins that currently go to the tower operator.
It would also give the group access to revenue generated from third-party customers using the infrastructure and make its infrastructure costs more predictable.
Towers are also becoming increasingly strategically important as networks become denser to handle growing data usage, 5G and fixed-wireless access.
When the deal was announced in February, MTN Group CEO Ralph Mupita described it as a “unique opportunity to buy back our towers”.
Competition conditions aim to protect MTN’s rivals
Other mobile operators also depend on IHS infrastructure, making their continued access an important part of the proposed transaction.
The Competition Commission’s recommended conditions require fair and non-discriminatory access for other networks.
They also prevent preferential treatment of MTN South Africa and require existing leases to be renewed on fair terms.
Further conditions are intended to protect jobs, the ownership share of historically disadvantaged persons and commercially sensitive information.
IHS must also remain operationally independent.
MTN’s payoff could come from margins and cost certainty
Those restrictions also provide an indication of where the financial benefits of the deal could lie for MTN.
Because the proposed conditions are designed to prevent MTN from using control of the tower infrastructure to disadvantage rival networks, the potential benefit is more likely to come through retaining margins, generating third-party revenue and gaining greater certainty over infrastructure costs.
The Competition Commission’s recommendation takes MTN another step towards completing the acquisition, but the deal still needs the Competition Tribunal’s approval and other outstanding regulatory clearances before MTN can take full control.
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