The Competition Commission of South Africa has granted MTN approval to take full control of IHS Towers, the largest cellphone tower operator in Africa. This approval comes with a set of conditions aimed at ensuring the combined businesses do not harm competition or customers and will protect local jobs. The commission's recommendation will now be reviewed by the Competition Tribunal, which has the final say on the matter.
MTN had announced earlier this year its agreement to acquire the 75% of IHS shares it does not already own for $2.2 billion in an all-cash transaction. The acquisition is expected to increase MTN's service revenue and expand its core earnings margin. The deal values IHS at $6.2 billion and will result in IHS delisting from the New York Stock Exchange.
The Competition Commission had initially found that the proposed transaction raised competition and public interest concerns. To address these concerns, the commission has recommended conditions that focus on protecting jobs and historically disadvantaged persons' ownership. These conditions also aim to preserve existing customer rights, ensure fair negotiations for lease agreements, and prevent preferential treatment of MTN SA.
The conditions set by the commission also seek to safeguard competitively sensitive customer information and support small, medium, and micro enterprise and historically disadvantaged persons' participation in new tower sites. Furthermore, IHS will be required to maintain its operational independence. The commission's recommendation comes almost two months after IHS shareholders approved the deal.
The acquisition is expected to enhance MTN's ability to cater to its network requirements and provide solutions for wholesale customers. The deal will allow MTN to amplify its digital infrastructure platform, which is critical to network performance and rollout. This includes supporting evolving 5G and fixed wireless access requirements.
The relationship between MTN and IHS has been a long-standing partnership, with moments of both collaboration and rivalry. As IHS's largest shareholder, MTN had been considering increasing its investment in the Nigerian tower company for several years. In August 2024, the two companies announced a renegotiated agreement for MTN's tower leases in Nigeria.
The successful conclusion of the deal is expected to result in net income and free cash flow accretion for MTN. The company anticipates benefiting from the strong financial merits of the transaction, with service revenue uplift and EBITDA margin expansion. The Competition Tribunal will now review the commission's recommendation and make a final determination on the transaction.
Key points
- The Competition Commission has approved MTN's acquisition of IHS Towers with conditions.
- The acquisition is expected to increase MTN's service revenue and expand its core earnings margin.
- The deal values IHS at $6.2 billion and will result in IHS delisting from the New York Stock Exchange.
