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Airtel to Conclude African Tower Sales in Days as Share Price Slips

Bharti Airtel, India’s telecommunications company, is expected to conclude the deal to sell its African towers in the next seven days, informed source close to the company have said.

The deal, valued at about $3 billion will assist in reducing its debts. Shares of Airtel slipped over 2 percent intraday on Tuesday as the firm steps up efforts to conclude its sale of tower assets in Africa. BusinessDay gathered that Bharti Airtel has already short-listed buyers from among four tower companies.

Reports have even confirmed that Airtel has received expression of interest from Helios, ATC, Eaton and IHS. If the deal does pull through, according to industry insiders, Airtel would gain considerable first-mover advantage in Africa’s highly competitive telecoms market where the cost of managing networks is doubling annually. Besides, the Indian company’s closest rivals, MTN and Etisalat, are also headed in the same direction. Bharti entered Africa with the USD9 billion acquisition of Kuwaiti telecom group Zain’s operations in the continent in 2010. It operates across 17 countries in Africa with a network of around 15,000 towers. Bharti Airtel’s net debt stands at Rs 60541.6 crore at the end of 2013-14. At 11:19 hrs, the stock was quoting at Rs 355.75, down Rs 5.55, or 1.54 percent on the BSE.

Nigeria, Africa’s largest economy, happens to be one of Airtel’s largest markets on the continent. As at February 2014, Airtel recorded total customer base of 26,194,336.00. The telecoms company has an estimated 6,000 towers in the country. MTN, South Africa’s telecoms group, is estimated to have 9, 000 telecoms towers in Nigeria; whilst Etisalat has 2, 500. It was gathered that IHS, American Tower Corporation (AMT), units of Helios Towers and Eaton Towers Limited are considering acquisitions of the MTN, according to a Bloomberg report.

These firms, backed by cash from wealthy investors including billionaire George Soros and Goldman Sachs Group, have bought thousands of towers from telecoms carriers in the region in the past two years. Partially owned by a Goldman Sachs-led consortium, IHS, which provides mobile phone infrastructure and services, had agreed to buy almost 3,000 towers from MTN in Rwanda, Zambia, Cameroon and the Ivory Coast since 2012. Analysts say that these move is an indication that a tower sharing industry is been formed.

“There is more pressure on telecoms networks with the increase of sophisticated smartphones that demand more bandwidth.
“All mobile operators have acknowledged and agreed that they have to look for alternatives to keep up with the rapidly changing patterns of usage, to reduce operating costs, and increase network coverage,” said Issam Darwish, chief executive officer, IHS. Telecoms carriers in Africa are offloading tower assets. Orange, France’s largest phone company, is looking at disposing of towers in sub-Saharan Africa and Egypt, sources familiar with the situation said. Andrew Lewis, analysts at Ashurst London, said the increasing number of tower sales across the African continent is indicative of “greater political stability, economic growth, a favourable regulatory environment and a fast-growing consumer market.”

Building and maintaining towers in Africa is typically more expensive than in other regions, according to industry analysts. This is largely due to high security costs and epileptic power supply, which often require cell sites to be powered by
BEN UZOR JRmultiple generators. In 2012 alone, telcos in Nigeria spent about N45.9 billion to fuel generators that power about 20,000 sites nationwide. Security officials monitoring towers also estimate that around 15-20 percent of total diesel consumption is pilfered. Managing towers can account for more than 60 percent of the expense to build a network, according to IHS Holding Limited

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