MTN may offload stake in IHS Towers

MTN SHARES inched up slightly in early trade on the JSE yesterday, reaching R134.66 each on news that the mobile giant was planning to offload its 29 percent stake in IHS Towers that is valued at R27 billion.

IHS Towers, the biggest independent tower operator in Africa, Europe and the Middle East, is reportedly planning an initial public offering (IPO) in New York later this year.

Peter Takaendesa, a portfolio manager at Cape Town-based Mergence Investment Managers, said offloading the IHS Towers stake made sense for MTN.

“Firstly, there is no real reason why MTN should remain invested in IHS Towers if it is listed. It is better for a tower company to be owned by an independent operator as opposed to a telecoms company. Secondly, MTN has high gearing on its holding company balance sheet at the moment and its IHS Towers shareholding is not reflected in the share price. At a good price for IHS, MTN can sell that stake and reduce its debt.”

Last week, MTN said its net debt had increased to R57.1 billion in the year ended December from R51.9bn for 2016.

It attributed the increase to lower cash generated from operations offset by R6.5bn repatriated from Iran, and an increase in head office net debt.

Reports have emerged that MTN would look to sell its stake if the tower operator went ahead with the share sale and the valuation was appropriate.

“It is not strategic to lock up so much capital,” Ralph Mupita was quoted as saying. “While MTN’s stake in IHS Towers is important, it’s been earmarked by the company as an asset for sale.”

Previous reports claimed that Helios Towers, one of the largest sub-Saharan telecommunications tower operators, planned an IPO in early April to allow shareholders such as Soros Fund Management to reduce their stakes.

Last year in February MTN exchanged its 51 percent interest in Tower InterCo, Nigeria’s telecommunication operator, for an additional stake in IHS. This resulted in an increase in the stake to 29 percent from 15 percent.

It said at the time that the transaction enabled it to simplify its tower ownership structure and diversify its exposure across the IHS Group, which operates in several markets in Africa.

“The transaction will better enable MTN to crystallise value for MTN’s shareholders in the future. The investment in IHS Group allows MTN to benefit economically from its previously owned passive infrastructure and continued network investment,” it said last year.

Sibonginkosi Nyanga, an analyst at Momentum Securities, said if MTN decided that IHS Towers was not a core business and costly to run, offloading the stake during an IPO was a wise move.

MTN shares declined 2.18 percent on the JSE to close at R130.49.