IHS Holding Limited (NYSE: IHS), the parent company of IHS Towers, an emerging markets tower company focused on Africa and Latin America, announced its Q3 2021 earnings and provided updates on its tower portfolio, completion of its initial public offering (IPO), closing of its of I-Systems FiberCo joint venture with TIM SA in Brazil, and agreement to acquire 5.7k towers in South Africa from MTN.

Financial Performance in Q3 2021 – IHS Holding

In Q3 2021, IHS Holding reported revenue of $401m, an 8.7% increase year-over-year, and adjusted EBITDA of $220m, a 4.2% decrease year-over-year. Therefore, the company’s EBITDA margin was 54.9% in Q3 2021, a 7.4% decline year-over-year. Degradation in IHS Holding’s EBITDA margin was driven in-part by higher power generation costs (i.e., oil and diesel), with the company continuing to expect this negative impact into Q4 2021.

Additionally, in Q3 2021, IHS Holding generated recurring levered free cash flow (RLFCF) of $73.6m, a 10% decline year-over-year.

Operational Performance in Q3 2021 – IHS Holding

IHS Holding’s total portfolio comprised 30.5k owned and managed tower sites as of Q3 2021. Specifically, these sites have a tenancy ratio of 1.51x, equating to 46.0k tenants with equipment on the company’s towers.

IHS Holding Towers Map Globally Q3 2021

IHS operates across 9 total countries, including 5 in Africa, 3 in Latin America, and 1 in the Middle East. Overall, the company’s top five markets by tower count include Nigeria (16.6k sites), Brazil (4.5k sites), Côte d’Ivoire (2.7k sites), Cameroon (2.2k sites), and Zambia (1.7k sites).

Key Market – Nigeria

Nigeria is IHS Holding’s largest and most important market, representing ~55% of towers, 72% of revenue, and 82% of EBITDA. However, Nigeria presents certain challenges for the company including economic oil dependency, foreign currency risk (Nigerian Naira), and customer concerns (wireless carrier 9mobile).

Portfolio Growth

Over the past 12 months, IHS Holding added 3.0k towers to its portfolio, while securing 3.5k net tenancy additions. Particularly, growth was attributable to the company’s acquisition of Centennial Towers’ 819 sites in Brazil and Colombia. Also, IHS acquired Skysites Holdings’ 1.0k sites which includes small cells and urban telecommunications infrastructure in Brazil.

Initial Public Offering (IPO) – IHS Holding

On October 14, 2021, IHS Holding priced its initial public offering (IPO), listing its ordinary shares on the New York Stock Exchange under the ticker IHS. IHS Holding raised gross proceeds of $378m, through the issuance of 18 million shares at a price of $21.00 per share. As a result, the company received net proceeds of $357.7m, after factoring in underwriting discounts, commissions, and offering expenses.

Share Sales

IHS Towers only sold 18 million primary shares through its IPO. While a contemplated 4.5 million secondary shares offered by selling shareholders, including MTN Group, were ultimately pulled. Given that IHS Holding’s IPO priced at the bottom of its range of $21.00 to $24.00 per share, existing shareholders elected to continue holding their stakes.

Price Performance Post-IPO

Since completing its IPO, IHS Holding’s shares are down 25%, closing at $15.75 per share on November 16, 2021, as compared to its IPO price of $21.00 per share.

I-Systems – Brazil Fiber-to-the-Home (FTTH) JV – IHS Holding, TIM SA

In November 2021, IHS Holding closed its transaction with TIM SA to acquire a 51% interest in FiberCo Soluções de Infraestrutura SA (FiberCo), which will operate under the name of I-Systems. Specifically, I-Systems has been setup to create an open wholesale fiber network in Brazil and to provide residential fiber optic broadband services.

Initially, I-Systems’ asset base includes TIM SA’s secondary network infrastructure, covering 6.41 million homes passed. Of this total, 3.5 million are fiber-to-the-home (FTTH) and 3.4 million are fiber-to-the-cabinet (FTTC) – with some overlap. I-Systems will deploy new fiber for TIM, the network’s anchor tenant, under a long-term master services agreement (MSA).

I-Systems is expected to generate net revenue of ~$57m and EBITDA of ~$30m in the first full-year of operations. Recall, IHS paid consideration of R$1.1bn ($200m USD) to TIM and funded R$233m ($42.5m USD) into I-Systems for future growth. Furthermore, IHS will contribute an additional R$350m ($64.0m USD) into I-Systems, in three installments, over three years.

South Africa Towers – Sale and Leaseback Agreement – IHS Holding, MTN

Today, IHS Holding agreed to acquire 5.7k telecommunications towers in South Africa from MTN, a wireless carrier in South Africa, for $415m (6.4bn South African Rand). At an enterprise value of ~$705m, the valuation is equivalent to ~$123k per tower. Specifically, this tower portfolio comprises 4.0k greenfield and 1.7k rooftop sites. IHS is acquiring these towers through a sale and leaseback agreement, with MTN as the anchor tenant.

Additionally, IHS Towers will provide Power-as-a-Service (PaaS) to MTN at 12.8k sites across South Africa, including the acquired 5.7k sites. Indeed, this total incorporates an additional 7.1k third-party sites.

IHS Holding – Pro Forma Business Impact

Incorporating both the acquired assets and provision of PaaS across MTN’s portfolio, the transaction will deliver $220m and $80m of revenue and adjusted EBITDA, respectively, in the first full-year of operations.

IHS Towers expects to own 70% of the towers business in South Africa. Whereas the remaining 30% will be owned by a Broad-Based Black Economic Empowerment (B-BBEE) consortium. Additionally, the transaction is expected to close in Q1 2022.

Pro forma for the South Africa acquisition, IHS Holding’s total portfolio will grow to 36.2k owned and managed tower sites. Indeed, this represents a 19% increase in the size of IHS’ total tower portfolio versus the end of Q3 2021.

IHS Holding Towers Map Globally Q3 2021 South Africa

Finally, Sam Darwish, IHS Holding’s Chairman and CEO, signaled on the company’s earnings call, one day prior, IHS’ desire to:

  • Enter “markets with substantial growth prospects” and scale, including both South Africa and the Philippines
Adam Simmons covers Towers for Dgtl Infra, including American Tower (NYSE: AMT), Crown Castle (NYSE: CCI), SBA Communications (NASDAQ: SBAC), Cellnex Telecom (BME: CLNX), Vantage Towers (ETR: VTWR), IHS Holding (NYSE: IHS), and many more. Within Towers, Adam focuses on the sub-sectors of ground-based cell towers, rooftop sites, broadcast / radio towers, and 5G. Adam has over 7 years of experience in research and writing for Towers.


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