Helios Towers to buy Airtel Africa towers in four African markets
Helios Towers plc, the independent telecommunications infrastructure company, has signed agreements with Airtel Africa to acquire its passive infrastructure operating companies in Madagascar and Malawi and enter into exclusive memorandum of understanding arrangements for the potential acquisition of its passive infrastructure assets in Chad and Gabon, all subject to required regulatory approvals.
The Transactions comprise four separate agreements:
Two separate agreements, one for each market, for the acquisition of Airtel Africa’s passive infrastructure companies in Madagascar and Malawi for a total expected consideration of $108 million. These acquisitions are both anticipated to close in or around the fourth quarter of 2021, subject to separate customary closing conditions including required regulatory approvals
In each of Chad and Gabon, the Group has entered into exclusive memorandum of understanding arrangements and, subject to obtaining a passive infrastructure licence in each jurisdiction, is expected to complete the acquisition of Airtel Africa’s passive infrastructure assets in those countries in or around the second quarter of 2022
The Transactions assets are expected to generate aggregated annualised revenues of $89 million and Adjusted EBITDA of $27 million (in the first full year of ownership), with further growth anticipated through 315 committed build to suits (“BTS”) and colocation lease-up.
Upon and subject to completion, Helios Towers will become the largest independent telecommunications infrastructure company in each of Malawi, Chad and Gabon with strong market share in Madagascar
Expected to increase Helios Towers’ geographic presence to 10 markets, delivering the Group’s 2025 vision to expand operational presence to at least eight markets, well ahead of plan
Further growth expected through 315 additional committed BTS sites
Together with the committed BTS and acquisition of assets in Senegal announced on 12 August 2020 – which is expected to close in the first half of 2021 – increases Group site count to c.11,500 towers, nearing the Group’s 2025 vision of expanding to 12,000+ towers
Long-term service contracts for an initial period of 12 years provide $1.1 billion of future contracted revenue, which together with the previously announced 15 year service agreement with Free Senegal, increases Group contracted revenue to c.$4.6 billion and extends average remaining life to 8 years
Strong hard currency Adjusted EBITDA mix at 85% for the portfolio, reflecting EUR-pegged currencies in Chad and Gabon and USD-linked revenues in Madagascar and Malawi, which further strengthens Group Adjusted EBITDA in hard currency to c.70%
Aligned to Helios Towers’ new market entry criteria and is expected to deliver on the Group’s disciplined internal returns thresholds
Upon completion, the Transactions are expected to be immediately accretive to earnings
The Transactions are expected to be financed through Helios Towers’ existing cash and debt facilities
The total consideration for the acquisition of the passive infrastructure companies in Madagascar and Malawi is expected to be $108 million, which represents an enterprise value of $124 million including estimated transaction costs and capitalised ground leases for the Group. These assets are expected to generate revenues of $38 million and Adjusted EBITDA of $13 million in the first full year of ownership.
In addition, Helios Towers has received a BTS commitment from Airtel Africa representing an additional 195 sites over the three years upon completion for which a further $11 million of deferred consideration and $24 million growth capex are expected to be invested by the Group.
In the year to 31 March 2020 the passive infrastructure companies being acquired in Madagascar and Malawi generated net profit before tax of $3 million with a reported gross asset value of $94 million.
In line with Malawian local telecommunications infrastructure licence requirements, the Group’s Malawian operating company is expected to obtain a 20% local Malawian shareholding which will be maintained during the term of Helios Towers’ operating licence in Malawi. This will be effected at closing.
The Group expects to disclose consideration details for Chad and Gabon upon signing of the acquisition agreements in each market.
Similar to Helios Towers’ other markets, Madagascar, Malawi, Chad and Gabon represent compelling markets for telecoms with a combination of a young, growing and increasingly urbanised populations plus high GDP growth, with each market forecast to deliver GDP CAGRs of 4% – 6% over the next five years (IMF, October 2020).
These dynamics will continue to drive increasing demand for mobile communications and consequently the infrastructure supporting it.
To support the anticipated expansion into new markets, Helios Towers completed an internal reorganisation in the second half of 2020, creating a new regional CEO structure and dedicated new markets team. This reorganisation supports the Group’s ongoing geographic and operational expansion characterised by the previously announced entry into Senegal, these Transactions and other potential future acquisitions.
Commenting on the transactions, Kash Pandya, CEO OF Helios Towers said: "We are delighted to announce these acquisitions which, alongside the previously announced entry into Senegal, means we will deliver on our 2025 ambition to increase our operational presence to at least eight markets well ahead of schedule and represents a significant step towards our target of 12,000+ sites. Additionally, as a result of service contract structuring and market selection, our hard-currency revenues and adjusted EBITDA will improve further, providing enhanced future stability for the business and complimented by the 12-year service contracts with Airtel Africa. We look forward to strengthening our relationship with Airtel Africa and the other MNOs by delivering exceptional services levels in these markets over the coming years, driving the sustainable growth of communications across Africa.”
