1 February 2017, MTN Group Limited (“MTN”) announced that it will exchange its 51% interest in Nigeria Tower InterCo B.V., the parent company of INT Towers Limited (“INT”), the Nigerian telecom tower operator, for an additional shareholding in IHS Holding Limited (“IHS Group") (the "Transaction"). As a result of the Transaction, MTN’s economic interest in IHS Group will increase from approximately 15% to approximately 29% (note 1). There are no conditions precedent to the Transaction and it is expected to close once the new shares in IHS Group have been issued during Q1 2017.
In exchanging all of its interest in INT in Nigeria for additional shares in the pan-African IHS Group, all of MTN's interest in IHS will sit alongside a world-class group of investors including Wendel, the International Finance Corporation (IFC), Government of Singapore Investment Corporation (GIC), Korea Investment Corporation (KIC) and Emerging Capital Partners (ECP), among other international investors.
The Transaction enables MTN to simplify its tower ownership structure and diversify its tower infrastructure exposure across the IHS Group which operates in a number of markets across Africa. Moreover, 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.
MTN’s President and Executive Chairman, Phuthuma Nhleko, noted that:
“The transaction represents a significant step in MTN’s long-standing partnership with IHS. It simplifies our ownership structure and diversifies our tower investments across the IHS Group. IHS Group is extremely well positioned for future growth and build-out from 3G upgrades and the move to LTE across its key markets.”
Issam Darwish, Executive Vice Chairman and Group CEO of IHS Group, said:
“The MTN transaction and partnership was transformational for IHS and has allowed us to invest a significant amount of capital to better serve our customers, accelerate our growth and the development of critical telecommunications infrastructure across Africa. We are delighted to announce the transaction which simplifies the shareholding structure of IHS Group and marks an important milestone as we strengthen our capital structure and our position as the leading independent tower company in EMEA."
The Transaction is a Category 2 transaction in terms of the JSE Listings Requirements.
About IHS Group: IHS Group is the largest independent tower operator in Africa, Europe and Middle East and the tenth largest independent tower company in the world, with over 23,300 towers. Founded in 2001, IHS Group provides services across the full tower value chain – colocation on owned towers, deployment and managed services. IHS Group continues to grow and develop its business with leading market positions in Nigeria, Cameroon, Côte d’Ivoire, Zambia and Rwanda and has also recently led in-market consolidation in Africa through its acquisition of Helios Towers Nigeria in early 2016.
Note 1 - Prior to the Transaction, MTN's interest in IHS Group was non-voting. Post the transaction, to ensure the continued independent and competitive proposition of IHS Group, MTN's influence on IHS Group is significantly restricted by a number of limitations including non voting rights, no board representation, and restrictions on access to information. These restrictions do not impact MTN's economic interest. Given limitations on influence, MTN's interest in IHS Group has to date been accounted for as a financial instrument “available for sale” in accordance with International Financial Reporting Standards, whereby MTN only accounts for the fair value changes relating to its investment directly in the statement of comprehensive income and does not consolidate or equity account the net profits or net assets of IHS Group. Whilst MTN continually makes assessments of critical judgments as it relates to its accounting treatment, the accounting treatment in respect of IHS Group is not currently expected to change.
MTN’s approximate15% interest in IHS Group was held at fair value of ZAR11.4 billion at 30 June 2016. For further information please refer to note 5 “fair value measurement of investments” in MTN’s consolidated financial results for the six months ended 30 June 2016.
Note 2 - The ratio at which shares in Nigeria Tower Interco BV were exchanged for new IHS Group shares was based on historic financial performance adjusted for growth, leverage and other adjustments.
Note 3 - About INT: INT is a Nigeria-based tower operator. The company was founded in 2014 by IHS Group and MTN which subsequently acquired 8,850 existing towers from MTN Nigeria. As at 30 June 2016, MTN's stake in INT was equity accounted for and whose carrying value was approximately ZAR4.6 billion. MTN recorded Net Losses of approximately ZAR2.5 billion in relation to INT for the six months ended 30 June 2016. As a result of the transaction MTN will derecognise its interest in INT.