Along the Tower

How did IHS begin its innovative model in Nigeria?

IHS Towers was established in 2001 in Nigeria as a company specializing in building and maintaining telecommunications towers for mobile network operators (MNOs). A few years later, when the operators became more comfortable with the concept of outsourcing the management and maintenance of these towers, we ventured into that market alongside them. We continue to oversee both the management and maintenance for the likes of Etisalat and Airtel. In 2008, exactly around the time of the global economic downturn, it became increasingly difficult for the operators to raise funds and expand their networks. Previously, if an operator wanted to expand into new regions, they had to build a tower that cost around $250,000 or more, depending on the type of tower. That is where IHS started pushing for a new business model that eliminated the operators’ need to spend money on building towers. In other words, we came in, built the towers, and charged the operators a monthly fee, which was lower than their monthly maintenance costs. It was an easy transition to this new model for operators as we had already established a trusted working relationship. Today, we have expanded our operating model to include IHS buying towers from the operators, thus they dictate the tower site location. A further model is where we acquire the existing tower and lease it back to the previous owner alongside other operators. This is the most efficient business model and has opened up the telecoms tower market and freed up capital for the operators. As a result, the revenue the operators make selling their towers can be invested back into their networks. Additionally, selling towers to an expert tower management company such as IHS allows for total focus on the task at hand. Our job is to maintain sites, while operators now have time to focus on selling more lines and airtime. We provide a better value solution and help MNOs exceed the quality of service they used to supply. To date, IHS has a sustained 99.99% network uptime across our five-country portfolio. Presently, we also own 60-70% of all towers in Nigeria. That portfolio is available for internet providers, private companies, banks, or anyone else who wants to have their own communications network. In a way we are indirectly improving the quality of service for voice and data. For the past five years, IHS has been building and managing telecommunications towers that are the essential backbone of mobile telecommunications in Africa, the leapfrog technology driving economic development, prosperity, and self-sufficiency across the continent.

What have been the challenges of your recent acquisitions of towers from MTN, Etisalat, and others?

Going into the commercial negotiations and finding the perfect win-win in terms of pricing has been a challenge. Once that is done, we focus on ensuring a smooth transition, involving moving the towers from MNO’s network to ours. We normally do that by shadowing their operations before our team takes over. When on-boarding a portfolio we also need to focus on the site power system. The site could be powered by a generator, a mix of batteries, or could be solar. Currently, IHS manages over 15,500 towers in Nigeria, including both built and bought towers. A tower is a long-term structure and therefore we focus on constantly improving the power system. Our network has to be up 99.9% of the time, which is a point of pride for IHS. Moreover, we continue to invest enormous amounts into our towers and are investing approximately $70 million in our state-of-the-art Network Operating Centers (NOCs). The IHS NOC operates 24/7 and monitors the performance of each of our towers and the rate of energy used while keeping an eye on any equipment failures that may occur. When there are 15,500 towers spread throughout the country, one must keep a close eye on all sites. Then there are the day-to-day challenges; operating the site, managing the surroundings, and dealing with logistical headaches. In order to ensure we’re as energy efficient as possible, this year we will invest close to half a billion dollars to roll out our new green energy saving technology. We are working to improve our renewable energy capabilities at all of our tower sites including the replacement of any dated power systems. We are making sure all new sites have environmentally friendly generators that consume less diesel and release decreased levels of carbon emissions.

What makes your business attractive to private equity players?

We are proud to have a strong and solid pool of international shareholders. Our shareholders include the likes of ECP, IFC, and Goldman Sachs. In 2014, we raised over $3 billion, which we have used to invest in the acquisition of portfolios throughout Nigeria, Rwanda, and Zambia, in addition to the green energy upgrade we are rolling out this year and next. Businesses focused on Africa look at the continent as a risky market but the opportunities and the returns are impressive, especially for a business like ours where we are investing in infrastructure. We are building and managing an asset that is generating long-term revenue. Most of our contracts span 10-15 years or longer.

How has the devaluation of the naira and weakening macro fundamentals affected your business?

We have more or less been unaffected by these developments as our relations are directly with the operators. We are a B2B business, and have little exposure to the government and individual consumers. However, the operators are facing increased pressures and are asking for help. We are constantly working to improve our services and to provide MNOs with better pricing options.

What are your expectations for 2016?

We have considerable work to do in-house to integrate the portfolios we have recently acquired and upgrade their power systems. You can never take your eyes off of further expansion but our growth is driven by the operators’ need to both expand their network and relinquish tower management. We are constantly assessing the African market, looking for operators who would like to dispose of their towers. Our belief is that the future economic and social development of Africa will be exponentially accelerated by mobile connectivity, and our team at IHS is focused on making this happen.