MTN closes in on IHS Towers buyout, eyes further fintech growth

• Nigerian regulator gives thumbs up for major asset acquisition
• Deal valuing towerco at $6.2bn still needs approval in South Africa
• MTN Group CEO identifies mobile money growth opportunity
• It has also struck an investment partnership to help grow its datacentre business

MTN Group is a step closer to closing its proposed multi-billion takeover of tower company IHS after securing conditional approval from Nigeria’s competitions regulator, which will bring to a close what CEO Ralph Mupita labelled a “complex transaction” that values the towerco at $6.2bn including debt.

Speaking during the earnings call that followed the the publication of its half year financial results, Mupita confirmed that Nigeria’s Federal Competition and Consumer Protection Commission was the latest regulator to rubber stamp the deal, though its approval came with conditions. In order to push through the full takeover, MTN has agreed to sell down up to 30% of the Nigerian component of the IHS business at market price: The proceeds will be used to pay down some of IHS’s debt.

“We are seeing good progress on the IHS deal,” Mupita explained during his update, noting that IHS has now sold off its operations in Brazil and Colombia “and we are now going through the key regulatory approvals process. We still have several regulators to go, including in South Africa, but we have completed some of the steps, and we are on track to close off the deal in the second half of the year.”

MTN first announced its plans to increase its 24.7% stake in IHS Towers – which operates around 29,000 towers across Africa – to 100% in February. The deal will cost the telco the equivalent of around $2.2bn, about half of which will comprise cash while the other half will be funded through liquidity and debt from MTN.

The deal now needs to be rubber-stamped by South Africa’s Competition Tribunal and also by the country’s telecom regulator, the Independent Communications Authority of South Africa: They will assess whether the complete takeover complies with precedents set during the initial sale-and-leaseback deal between MTN and IHS in 2022.

Lending a hand

Looking beyond towers, Mupita also used the earnings call to set out MTN’s ambitions in the mobile money and payments space. The CEO confirmed that the Africa operator is exploring banking licences in select markets as it looks to expand its lending services by using its own balance sheet to offer loans.

In recent years, MTN has accelerated its expansion in the fintech sector. Just this week, it announced that its fintech division had worked with Ericsson to move its Mobile Money (MoMo) platform to a standardised cloud-native architecture. The migration already includes Eswatini, Ghana, Rwanda and Uganda. The next stages of the process will start with an ongoing project in Cameroon as well as active discussions to bring Benin, Republic of the Congo and Zambia onto the same transformation path. 

"We're ​seeing good growth on advanced services, which are our future-proof services," ​Mupita told journalists, referring to offerings such as payments, e-commerce and ⁠lending. "The big growth now, which will be the growth of the future, ​is actually lending."

MTN already offers loans through its partnerships with several banks, but he said growth in financial services had been particularly strong (up 78%) and there was an opportunity to grow further.

“The majority of our banking service has been through partner banks,” explained Mupita. “We have started to incrementally do our own balance sheet lending as we look to acquire the licenses across several markets, and we are seeing good growth on payments and e-commerce. The big opportunity is around advanced services and lending over the medium term in markets such as Ghana or Uganda.” However, the CEO also stressed that this move  “doesn’t mean we won’t be doing partnership lending any more.”

Datacentre venture

MTN is also advancing its datacentre strategy, noting in its earnings report that it continues to develop “an AI-enabled platform to address growing demand for cloud, enterprise and data-intensive services”, with South Africa and Nigeria selected for the initial phase of deployment. 

The operator also noted it has entered into a strategic partnership, dubbed Africa Data Hub Holding Ltd., with an unidentified UAE-backed datacentre investor to “accelerate the development of AI-ready digital infrastructure platforms across Africa. The partnership “combines MTN's extensive African footprint, market knowledge and infrastructure assets with international investment backing and specialist datacentre expertise,” with Africa Data Hub lined up to “serve as the platform through which future digital infrastructure opportunities will be developed and scaled across key African markets.”

MTN added: “The agreement marks a significant milestone in the execution of the Group's datacentre strategy and supports its ambition to meet growing demand for cloud, enterprise and AI-enabled services across Africa.” 

- James Pearce, Editor, TelecomTV