Helios Towers plc, an independent telecommunications infrastructure company, has entered into agreements with Airtel Africa for the acquisition and rollout of over 2,500 sites which will support the group’s entrance into four new markets and includes build-to-suit commitment for 314 additional sites.
The agreements will allow Helios Towers to acquire Airtel Africa Groups 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.
Two separate agreements will be entered into 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 Q4 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 Q1 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.
The transaction represents 2,227 existing sites across Madagascar, Malawi, Chad and Gabon and is expected to increase Helios Towers’ geographic presence to 10 markets. Further growth is expected through 315 additional committed BTS sites and the acquisition of assets in Senegal which is expected to close in H1 2021 will increase the Group site count to c.11,500 towers.
There will be long-term service contracts for an initial period of 12 years providing $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.
A 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, will further strengthen Group Adjusted EBITDA in hard currency to c.70%. Upon completion, the Transactions which are expected to be financed through Helios Towers’ existing cash and debt facilities are expected to be immediately accretive to earnings.
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 H2 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.
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.”