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Dubai - Specialist tower company IHS, who announced on Wednesday a deal with MTN [JSE:MTN] that could be worth about $1.8bn, said mobile operators are selling their towers to free up capital for broadband.
MTN agreed to sell 9 151 mobile towers in Nigeria to a new joint venture with IHS. MTN said it will cut its costs and boost its call and data capacity in Nigeria.
The latest IHS tie-up with MTN, Nigeria's top mobile operator with a 46% share of subscribers, is the fifth between the companies following transactions in Ivory Coast, Cameroon, Rwanda and Zambia in the past two years.
IHS will take operational control of the jointly owned company in a deal due to close in the fourth quarter, subject to regulatory approvals, Lagos-based IHS said on Thursday.
The towers specialist did not reveal the deal's value, but an agreement in August to buy and lease back 2 136 towers from Etisalat Nigeria, an affiliate of Abu Dhabi’s Etisalat, was said by banking sources to be priced at about $400m.
Based on roughly the same valuation, the new MTN deal would be worth about $1.8bn.
“There’s massive growth potential in Nigeria,” IHS chief executive Issam Darwish told Reuters.
“Broadband will be the most important factor. Part of the reason mobile operators are selling their towers is to free up capital and resources to concentrate on this opportunity.”
Nigeria has about 125 million mobile subscribers, while mobile Internet subscriptions total around 66 million, according to the industry regulator. Nigeria’s population is 177 million, the CIA Factbook estimates.
Darwish said the relatively slow take-up of mobile Internet in Nigeria, and Africa in general, is because of the high cost of smartphones and limited frequencies for operators.
'Very bullish'
But some handsets now cost less than $100 and prices are likely to fall further, while regulators are freeing up spectrum better suited to mobile broadband, Darwish said, which should lead to an internet boom.
“We’re very bullish, while there is still also growth in voice,” Darwish said.
The MTN-IHS deal will "reduce MTN Nigeria’s operating costs, drive network efficiencies and further expand MTN’s voice and data capacity," MTN said in a separate statement
Building and maintaining mobile communications towers in Africa is typically more expensive than in other regions because of security costs and electricity shortages, while revenue per user is often lower.
That has prompted many operators to sell or lease towers to specialist companies, which can reduce building and maintenance costs by hosting multiple tenants - mobile operators and Internet providers - on the same towers.
It also allows operators to focus on marketing and customer service, which become more important to rival operators as differences in network quality diminish.
The new joint venture will invest more than $500m over four years to upgrade the MTN towers, boost maintenance and improve service quality, the IHS statement added.
On completion, IHS will manage more than 20 000 towers in Africa. The company aims to manage more than 25 000 towers by the end of 2015, it added.
Darwish said IHS would build the bulk of these extra towers, though small-scale acquisitions are also possible.
