Sexy Steel

Why MTN Group wants to buy its landlord

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Sexy Steel

In the last couple of years, the term asset-light has firmly lodged itself into the world of business. Every company now prides itself on being efficient, which often just means owning as little non-essential stuff as possible.

In practice, it’s straightforward: sell the stuff that ties up your capital. Focus on your core competency. Don’t own the real estate; lease it. Don’t own the trucks; outsource the logistics. Don’t own the towers, rent them.

But this is the real world; when you’re confronted with new information and data, you do an about-turn.

All of that to say: MTN Group is reportedly in advanced talks to buy the remaining 75% of IHS Towers it doesn’t already own, in a deal that could value IHS at around $2.76 billion. (IHS has also confirmed the approach is non-binding and there’s no certainty that a transaction will happen.)

Twelve years ago, the point of the towerco model was that telcos shouldn’t own towers.

Why carry a lumpy, capital-heavy asset on your books when you can turn it into a long-term contract and let a specialist sweat the operations while you focus on the sexy parts of spectrum, customers, pricing wars, and, in Nigeria, the eternal sport of convincing the NCC to raise tariffs?

Before we get to the question of how we got here, it’s critical to know that if the deal happens, it will be a group-level acquisition of what is mostly a Nigerian business. FY2024 filings show that Nigeria accounted for 58.3% of IHS’s total revenue (down from 65% in 2023).

MTN Nigeria alone accounted for 46% of IHS revenue in 2024, while MTN South Africa accounted for 5% (with MTN Cameroon and MTN Côte d’Ivoire at 4% each, MTN Rwanda 2%, MTN Zambia 1%).

With that out of the way, let’s rewind.

The logic of outsourcing tower operations was always straightforward.

Cell towers are not about just putting steel in the ground; there’s diesel and power, security, maintenance, and the million and one things that can go wrong. In infrastructure, Murphy’s law is never far behind.

So the towercos pitch to telcos was: sell us your towers, and we’ll give you cash upfront. Also, instead of unpredictable capital expenditure, you get predictable operating expenses from lease payments.

The Towercos would take the operational burden and make the economics sing by stacking multiple tenants on the same tower. A tower has a high fixed cost; you’ve got to build, secure and power it. But once it exists, adding a second tenant adds revenue. Costs don’t double because another telco hangs equipment on the same steel.

I assume it wasn’t hard to convince Nigerian telcos to join what was broadly a global trend (only Globacom held out). MTN agreed to transfer up to 9,151 towers supporting its Nigerian network into a new company jointly owned with IHS, with IHS having operational control. Etisalat sold 2,136 towers to IHS in a sale-and-leaseback deal. Airtel agreed to sell 4,800 towers in Nigeria to American Tower in late 2014.

In the best of times, towercos work because they are boring businesses. They lock customers into long-term contracts, enjoy stable input costs, and diversify their tenancy.

In the last couple of years, none of those best-of-times assumptions have been true about Nigeria. Electricity prices have risen, inflation stubbornly skyrocketed, and FX volatility joined the party.

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MTN Nigeria renegotiated its tower lease agreements with IHS, extending master lease agreements to 2032 and adjusting terms to create what both parties called a more sustainable split between local and foreign currency. The revised terms substantially reduced the US dollar-indexed component, made leases majority naira-based, and removed certain technology-based pricing mechanics. Bye-bye boring contracts.

How about diversification? In IHS’s FY2024 annual report, its top three customers collectively accounted for 98.5% of consolidated revenue, with MTN Nigeria and Airtel Nigeria accounting for 46.0% and 11.4%, respectively. It can’t be easy to keep being a neutral landlord when one customer accounts for almost half of your revenue. When MTN Nigeria announced it was moving 2,500 sites to American Tower, IHS responded with legal action and public escalation.

In the ideal TowerCo story, the tower company is Switzerland. In the Nigerian story, the tower company sometimes looks like it’s part of the war, instead of renting land to the soldiers.

Say what you will, but towers have become too big to ignore, and that became doubly obvious in 2024.

In 2024, tower lease expenses (often dollar-indexed) had become nearly half of MTN Nigeria’s operating costs amid currency instability and inflation.

So maybe MTN Group is looking at its landlord and thinking: maybe we should be the landlord.

There’s also a small argument that telecom narratives get stale: subscribers up, data up, mobile money up, repeat. Owning the infrastructure stack is a different chapter, especially in markets where infrastructure can be unpredictable..

But there are problems that buying IHS doesn’t solve.

If MTN ends up owning IHS, the towers will still have diesel costs, security costs, maintenance costs, and IHS’s own financing and overhead to deal with.

Owning the towerco doesn’t magically eliminate the economic burden of running towers. There’s also the reality that towers make money by hosting multiple tenants.

If MTN becomes the majority owner, will Airtel and others be willing to rent from their rival?

See you next week!