The Competition Tribunal of South Africa has granted MTN approval to acquire full control of IHS Towers, Africa's largest cellphone tower operator. The tribunal imposed conditions to ensure the combined entity does not harm competition or customers and protects local jobs. This approval comes after MTN agreed to buy the 75% of IHS shares it does not already own for $2.2bn in an all-cash transaction. The deal is expected to increase MTN's service revenue and core earnings margin.
The Competition Commission, which investigated the market structure, had raised concerns about the proposed transaction, citing competition and public interest issues. To address these concerns, the commission recommended conditions that focus on protecting jobs, historically disadvantaged persons' ownership, and customer rights. The conditions also aim to ensure fair access to infrastructure for mobile network operators and non-MNO customers of IHS. Additionally, the conditions safeguard competitively sensitive customer information and support small, medium, and micro enterprise participation.
The acquisition, which values IHS at $6.2bn, was approved by IHS shareholders almost two months ago. Following the deal, IHS will delist from the New York Stock Exchange. MTN operates in all of IHS's African markets, and IHS derives about 70% of its revenue from MTN. The synergies between the two companies are clear, with MTN expecting to amplify its ability to cater to its own network requirements and provide solutions for wholesale customers.
According to MTN, the transaction will enhance and accelerate the scaling of its digital infrastructure platform, which is critical to network performance and rollout. This includes densifying networks to support evolving 5G and fixed wireless access requirements. MTN expects the transaction to result in net income and free cash flow accretion. The company anticipates benefiting from the strong financial merits of the transaction, with service-revenue uplift and ebitda margin expansion.
The relationship between MTN and IHS has had its ups and downs, but the successful conclusion of the deal marks a new chapter in their long-running partnership. As IHS's largest shareholder, MTN had been considering increased investment in the Nigerian tower company for several years. In August 2024, IHS and MTN announced a renegotiated agreement for the mobile operator's tower leases in Nigeria, reducing MTN's infrastructure costs in foreign currency.
The conditions imposed by the tribunal require IHS to maintain its operational independence and ensure that no customer is disadvantaged relative to MTN SA. The tribunal also stipulated that renewals of all existing lease agreements be negotiated fairly and that small, medium, and micro enterprises and historically disadvantaged persons participate in new tower sites. These conditions aim to promote fair competition and protect the interests of all stakeholders.
With the acquisition, MTN's Ralph Mupita-led team expects to enhance the group's strategic priority to consolidate passive infrastructure critical to network performance and rollout. The deal is expected to support MTN's growth strategy and provide a strong foundation for its digital infrastructure platform. The acquisition is a significant step for MTN, and the company is poised to benefit from the transaction's financial merits.
Key points
- The Competition Tribunal approved MTN's acquisition of IHS Towers with conditions to ensure fair competition and protect local jobs.
- The acquisition is expected to increase MTN's service revenue and core earnings margin.
- IHS will delist from the New York Stock Exchange following the deal.
