IHS Towers, the operating company of IHS Holdings (NYSE: IHS), reported solid growth for 1Q22 in its key operating markets in Africa, Latin America, and the Middle East. Year-over-year, the tower portfolio grew by 14 percent or roughly 4,000 sites to 33,275. Tower tenants increased 12 percent to 49,643, for an average of 1.5 tenants per tower. A pending deal with MTN South Africa involves approximately 5,700 towers. Once that deal closes in 2Q22, IHS Towers will own nearly 39,000 towers across 11 countries in Africa, Latin America, and the Middle East.
Revenue for 1Q22 was $446 million, a 23 percent YoY increase, and Adjusted EBITDA came in at 245 million, up 14 percent compared to 1Q21. Capital expenditures for the quarter were $117 million versus $94 million in 1Q21.
Originally founded as a Nigerian tower company, IHS Towers is positioned in some of the largest emerging markets, measured by GDP, in the world – Nigeria, South Africa and Egypt in Africa, and Brazil in Latin America. Nigeria is IHS’s largest market, accounting for 64 percent of total 1Q22 revenue.
The company is moving on three strategic fronts. As Inside Towers reported, the company acquired GTS’ SP5 tower portfolio company in Brazil with 2,115 towers and a nationwide footprint in 25 states. With a total of 6,786 towers in Brazil, IHS is the country’s third largest independent towerco behind American Tower and SBA Communications.
The company is in discussions with the MNOs in Egypt to acquire portions of their respective tower portfolios. Those discussions are progressing slowly given the current macroeconomic environment. Egyptian MNOs still own 24,000-25,000 towers, excluding build-to-suit towers. As such, there is no existing independent tower company of scale in Egypt. Aside from acquisitions, IHS Egypt, 80 percent owned by IHS, still could build up to 5,800 towers in the first three years of any agreement and with the potential to acquire towers owned by third parties.
In the deal with MTN South Africa, expected to close in 2Q22, IHS Towers will acquire MTN’s tower portfolio of approximately 5,700 towers and provide managed services for an additional 7,000 sites. IHS expected to be 70 percent shareholder, with the remaining 30 percent to be held by equity partners. The deal is an attractive acquisition at a multiple at 8.7x Adjusted EBITDA. IHS will become the leading independent towerco in South Africa.
IHS Towers operates in several markets, particularly Nigeria, where the power grid is highly unreliable or unavailable. As a consequence, the company provides power at its MNO customers’ sites primarily using diesel generators. Over time, IHS Towers added hybrid solutions, including solar and battery configurations.
At year-end 2021, 42 percent of its sites in Africa were running on a hybrid diesel-solar solution, 7 percent of sites used a grid-solar combination, 28 percent used generator-only, and the remaining 24 percent primarily used the grid with diesel backup. Except for Nigeria, the company passes through to customers the cost of the diesel operation. IHS Towers is working on a plan, referred to as Project Green, to identify areas where it can further reduce diesel consumption.
Encouraged by its 1Q22 progress, the company provided upbeat guidance for full-year 2022. At the midpoint, it expects revenues of $1.885 billion, which represents approximately 15 percent organic growth. It further projects Adjusted EBITDA of $1.015 billion and capital expenditures of $565 million. IHS Towers plans to build around 2,350 towers in 2022, including about 1,250 in Nigeria and 700 in Brazil. The guidance includes the MTN South Africa transaction but excludes any activity in Egypt.
By John Celentano, Inside Towers Business Editor
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