African Infrastructure Giant Helios Towers Enters a New Phase Post-IPO

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TowerXchange Interview

On Tuesday October 15, Helios Towers, one of the leading independent tower companies in Africa with 6,882 sites, went public. Helios maintains strong site inventories in Tanzania, Democratic Republic of Congo, Congo Brazzaville, Ghana and this past year established a presence in South Africa. TowerXchange interviewed Helios CEO Kash Pandya at their recent MeetUp Africa Conference. The company claims a tenancy ratio of 2.05x.

TowerXchange: Why has Helios Towers taken the step now to IPO? What made the time right?

Kash Pandya, CEO, Helios Towers: We have been ready to IPO for some time, but the time was right because we wanted access to further investment equity, and have now raised well over US$100mn through the IPO ready to invest in new acquisitions. We also have debt capacity too, and with our targeted EBIDTA to debt ratio of 3.5x-4.5x we have around US$300mn of ammunition. At historical purchase prices that translates to 2-3,000 towers and we think there are opportunities out there. 

Listing also allows us to raise further capital more easily, as we require it. Across Africa we are seeing a renewed vigor for MNOs to sell their towers. Of the 225,000 towers in Africa, only 27 percent of towers are owned by towercos. There are 164,000 towers owned by MNOs which could pass to towerco ownership, There are also vast geographies in Africa without coverage, and many countries without independent tower companies at all.

We listed our shares at 115p, and reached 123p on the first day, but I do not want to be fixated on the share price. The share price can be impacted by a number of things outside the control of the business, so as CEO and as management we aren’t focusing on those factors, we want to focus on our quarter-on-quarter growth; we have had 18 consecutive quarters of EBITDA and margin growth. Our Q3 results will be out in mid-November and we are keen to make sure those are positive.

TowerXchange: You are one of the first non-extractive industry companies to list on the LSE with exposure to frontier markets in SSA, does your market cap at around US$1.5bn reflect fair value? Are investors getting more comfortable with firms exposed to DRC and Tanzania?

Pandya: We put a range out, and priced at the bottom of that range. There was a lot of share price volatility while Tom (Greenwood, Helios Towers CFO) and I were on the road. But once we went public it was clear we priced well. When a new listing comes into a market, like Helios Towers, there’s a couple of discounts before the trade buyer pays. There is a control premium which is unavailable because our free float is only 25%, and there is a normal IPO discount. So we think our shares are trading at the right place now.

TowerXchange: What organic growth opportunities are out there for Helios Towers? Which markets besides South Africa could you enter at a small size and scale?

Pandya: There are lots of markets looking to liberalize their telecoms sector which Helios Towers could enter. Angola and Ethiopia being two examples. Both have major state owned telecoms companies and many state owned towers. We were at a conference a few months ago in Ethiopia and know of many large African MNOs that are already active there. And in time it could be interesting for towercos. There are over 100mn people in Ethiopia, with only around half the population on 2G or 3G, and just 8,000 towers. South Africa with nearly 60mn people has 30,000 towers, so Ethiopia has a big potential.

Time will tell on what happens in Ethiopia. But with the capital pressures on MNOs, I believe they will look at towercos to come in and support their capital investment. Any business that operates successfully in Africa has done so through hard graft, such that we can see similarities in a frontier market like Ethiopia. Ethiopia may end up no different, very similar to our journey in DRC or Tanzania. People could have argued with our 2010 entrance into the DRC, but we have been able to expand, grow, profit, and offer an amazing service in DRC. We can leverage that experience elsewhere.

TowerXchange: Turning to South Africa, what comes next for Jeff Schumacher and the team?

Pandya: We entered South Africa this year at the end of Q1, and we spoke with TowerXchange at the time in your interview with Jeff Schumacher. We entered a joint venture with local fibreco Vualtel, and acquired local towerco SA Towers with their 100 sites, pipeline of work and team of circa 25 employees who really know the market.

We have a plan over the next three to five years to become a substantial towerco in South Africa. Only 10% of towers are towerco owned in South Africa. We are deploying significant capex in South Africa, in the rest of our markets we are planning to spend US$100mn in 2019, and in South Africa we will be spending US$30mn.

From independent research, we think close to 7,000 new points of service will be required in South Africa over the next five years, driven by 4G growth and 4mn new 5G connections, and we want to be part of that.

TowerXchange: An IPO is an important step for a company, but it is not the end, how would you summarize the trajectory of the company over the next year.

Pandya: This is our third chapter as a company, after the phases of acquisition and then operational excellence, we are now a mature public company looking to continue our journey. Over the next five years I want to expand into new markets. We have done nine sales buy and leasebacks so far, and we are looking to do more and enter new markets too. That means tower growth both organically and inorganically. We have US$300mn now to deploy on inorganic growth, and we wouldn’t have generated that if we weren’t serious. These are very exciting times. 

October 18, 2019

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