IHS Plans More African Phone Tower Deals

IHS, telecoms Infrastructure Company, hopes to agree up to three transmitter tower deals in Africa this year and increase the size of its portfolio nearly seven-fold within the next four years.

Lagos-listed IHS owns about 3 100 base stations, or towers that transmit mobile phone signals, and manages a further 2 000 sites for telecoms operators in Africa including South Africa’s MTN, India’s Bharti Airtel and Etisalat Nigeria.

Operators in Africa, which often struggle with higher running costs and lower revenue per user than other regions, try to reduce expenditure by pooling or selling their transmitter towers.

They can this do via tower-sharing deals, but selling towers to specialists such as IHS is more popular, with these firms also leasing new-build towers to multiple operators.

IHS’s towers are in Nigeria, Africa’s most populous country, plus Cameroon, Ivory Coast, Sudan and South Sudan and the company is looking at acquisitions in another six countries on the continent, Issam Darwish, chief executive told Reuters in an interview on Tuesday.

“Hopefully we can do another 2-3 this year,” said Darwish, adding these were likely to be in West or East Africa. “We plan to own 20,000 sites within the next four years.”

Darwish said he expects the next big growth driver in the region to be an expansion of Internet access via mobile networks, provided governments free up the required radio spectrum.

“Data demand is going to surprise and explode beyond expectations, we just have to get the regulators to provide operators with enough spectrum,” said Darwish.

Other factors IHS considers before deciding whether to enter a country include population, economic growth, mobile penetration and the number of mobile operators, he said.

Nigeria is the mainstay for IHS, which owns about 1,300 sites in its domestic market, of which 900 are operational and 400 under construction, with a further 500 to be built within the next year. These new towers will provide network coverage to about 7 million Nigerians currently out of reach, IHS estimates.

Nigeria’s mobile penetration was 59 percent in 2011 and though this is steadily rising, the country is in the bottom quartile globally.

The lack of a reliable electricity supply is one of the biggest constraints, with about 95 percent of Nigeria’s 24,000 telecom towers run on generators rather than taking power supply from the country’s electricity grid.

“Operators haven’t even invested in connecting to the grid because it was so unreliable,” said Darwish.

These towers consume about $540 million of diesel annually, while total fuel cost when delivery and other factors are included is about $750 million, he estimates.

This led IHS to launch an efficiency drive that Darwish said would halve its diesel consumption by April 2014 by installing more advanced generators and revamping its supply chain.

“We started in Nigeria a year ago because it’s our biggest operation and now that we know what to do we started with Cameroon, Ivory Coast and Sudan,” said Darwish.

On-grid electricity powers 60-80 percent of sites in Cameroon and Ivory Coast, he said.

A tenth of the company’s sites in Nigeria have been switched to a hybrid of solar and generator power, cutting diesel consumption at these sites by up to 70 percent.

Solar-only sites are favoured in rural areas with low consumption where delivering diesel is more expensive.