When Covid-19 arrived on Africa’s shores, pan-African telecoms infrastructure company Helios Towers was just months past raising $364m in an October 2019 IPO on the London Stock Exchange and aggressively pushing to acquire thousands of mobile towers in new markets across the continent.
For the owner-operator of over 7,000 telecoms towers – the infrastructure used by the continent’s biggest mobile network operators (MNOs), including MTN, Orange and Vodacom – the timing appeared far from ideal. Yet despite the challenges of coordinating business across five markets in various states of Covid upheaval – Tanzania, DRC, Ghana, Republic of Congo and South Africa – Helios Towers CEO Kash Pandya remains bullishly upbeat about the firm’s prospects and deal-making intent.
“While the Covid dynamic has been the backdrop for everyone in the world, we and our customers [the mobile network operators] have fared frankly rather well in our markets. We’ve kept up the momentum of growth for our business, not only in the existing markets we operate in… the business has seen continued expansion and our customers investing and growing,” says Pandya in an exclusive interview with African Business.
The company’s results for the first half of 2020 hint at the resilience of the telecoms sector in the face of the pandemic as lockdowns and home-working spark a continent-wide surge in internet and mobile data usage. Group revenue increased by 7% year-on-year to $204m, while adjusted earnings before income, taxation, depreciation and amortisation increased by 10% year-on-year to $109m. Operating profit increased by 131% to $29.3m. Tenancies at sites were up by 6% and the firm added 210 towers in a year, bolstered in August by a provisional deal to add 1,220 towers in Senegal.
“I think particularly for Africa where there is really no fixed line infrastructure like the West has been used to, during the pandemic people relied on mobile services even more. You’ve seen and heard of the announcements from our customers, people like Vodacom, Orange – all have mentioned in their trading updates that they’ve seen increased volume particularly on data and people are utilising the mobile connectivity in the whole of Africa,” he says.
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Pandemic has limited impact
The isolated nature of tower infrastructure – sites are maintained by engineers using four-wheel drive trucks in remote areas – has meant that there has been a limited impact on the day-to-day maintenance and operation of towers, says Pandya, who concedes that he has been forced to travel less from Helios Towers’ London base.
“I haven’t been able to travel to the markets as I’d like since the end of March due to the effective lockdowns which have occurred for the obvious reasons, but we’ve managed to continue the momentum and we use Zoom and the digital solutions available to us to manage the organisation,” he says.
While Helios reported that there has been “no significant operational impact from Covid-19 to date” in its half year results, Pandya says that the pandemic has slowed down some government approvals for new sites, something which is gradually returning to normal.
“Where we’ve seen a bit of a slowdown is driven quite simply by requirements for permitting and site government approvals. This is natural in the pandemic dynamic because a lot of government staff were also working from home or offices were shut, so we did see a little bit of a slowdown in terms of site count increase driven by the ability for us to permit sites, but not driven by customer requirements.”
Five-year target still firmly in sight
Nevertheless, Helios Towers is sticking to its five-year target to acquire over 12,000 towers across the continent as MNOs seek the infrastructure needed to deal with an upsurge in subscriber numbers and data usage since the advent of Covid-19. At the same time, says Pandya, MNOs are increasingly interested in outsourcing infrastructure to “towercos” so that they can release balance sheet value and invest in consumer facing technology such as the rollout of 4G.
This presents multiple opportunities to Helios Towers and other towercos – including IHS Towers and American Tower – as they target markets with low levels of mobile penetration.
“Probably in our view we may deliver it ahead of the five-year horizon we outlined. To summarise our strategic vision, it’s to go from five markets to eight markets over the next five years, and take our 7,000 tower count at the beginning of this year to over 12,000. We’ve never been busier in terms of M&A opportunity and we’ve not been around 10 years. We’re calling this the second phase of outsourcing by MNOs in Africa… there’s 230,000 towers in Africa in total today and 160,000 are still owned by MNOs. We’re obviously very close to those customers and believe in time they’ll be looking to sell towers in the markets we’re in.”
On 12 August, Helios Towers took a major step towards its ambition when it signed an agreement, subject to regulatory approval, to acquire a 1,220 tower portfolio for $189m from Free Senegal, the second-largest mobile operator in the country. Under the deal, 400 build-to-suit sites will be rolled out over five years, and Helios has entered into a 15-year service agreement.
“For us Senegal has been an exceptional market against those metrics because we’ve ticked every box we look for when we enter into markets. For example 5% GDP growth, a population of 16m growing 3% year-on-year, three operators [Free Senegal, Orange, Expresso Telecom] and no other independent tower companies operating in Senegal, so we have first mover advantage. The currency is pegged to the euro which gives us that stability. Subscribers per points of service is very high. We’re really excited about getting this deal completed in Q1 as soon as we get regulatory approval.”
Tunisia, Egypt and Morocco, Madagascar, Gabon and Chad are other future areas of interest, but one market that has yet to blossom is Ethiopia, where the government of reform-minded prime minister Abiy Ahmed, hampered by regional strife and Covid-19, is slowly mulling the privatisation of the telecoms sector. Pandya says that a conducive regulatory environment will need to be offered by Ethiopia to international MNOs before “we go there and invest hard dollars” and mobile tower licences will need to be made available.
“My view is that it will happen but it may be a little slower than we first anticipated back in 2019… it’s partially driven by the Covid-19 dynamic – it’s slowed down a lot of the world and Ethiopia is not unusual in that. We’re still very excited by Ethiopia but it may be an opportunity more in the second half of 2021 as the world learns to cope with Covid-19 in a positive way.”
Future M&A activities
Investors have responded in a broadly positive manner to the company’s post-listing trajectory, with shares trading at 159p ($2.07) in mid-October compared to 122p on the day of the company’s listing in 2019 and a 205p peak in June. Pandya says that Helios Towers will not be afraid to go back to the markets to fund future expansion.
“So far we have enough funds for another Senegal or two, frankly, in terms of our ability to execute through our debt funding alone, so we’re very comfortable with the way to transact future M&A activities. But ultimately if there was a large transaction that came along that required further funding outside debt and cash financing, we’ve also got the option to raise further equity capital and that was one of the exciting aspects to us wanting to list back in October 2019.”
Listen to the full interview on our African Business podcasts series:
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