MTN Nigeria (MTNN) shares surged to a historic high of N780 per share on Thursday, as investors reacted with overwhelming optimism to the group’s landmark $6.2 billion acquisition of IHS Towers.
The deal, which sees MTN reclaim full control of the 29,000 tower assets across Africa, marks a definitive end to the “asset-light” outsourcing era.
By shifting from a tenant to a landlord, MTN is expected to internalise significant margins, eliminate dollar-linked lease volatility, and gain direct sovereignty over the infrastructure critical for its 5G rollout.
This strategic “buyback” has fundamentally altered investor valuation of the telecom giant, pushing its market capitalisation past the N16 trillion mark (N16.376trillion) as traders bet on a more resilient, vertically integrated future. MTNN has 20.995 billion shares outstanding.
At N780, the stock rose by N30 or 4 percent as at close of trading on Thursday February 19 as against day-open price of N750 per share.
IHS is one of the world’s largest tower companies, with nearly 29 000 high-quality towers in Africa serving various mobile network operators in five key MTN markets.
Speaking on how this deal will impact MTNN valuation, Kayode Adegoye, chief operating officer at Lagos-based Arthur Stevens Asset Management Limited told BusinessDay that the deal will impact on MTNN stock valuation.
“The valuation would go up. The potential of their cashflow has significantly increased,” he added.
The telco’s new share price represents its 52-week high as against a 52-week low of of N230. Investors traded 7,169,766 shares of MTN Nigeria worth N5.542 billion.
Charles Egbunonwo, managing director, The Brook Securities Limited said that “I believe the acquisition should give MTNN better control over the towers and flexibility for quicker site roll out and mast deployments particularly for its 5G expansion.”
He said “This acquisition in the long term should thus improve earning since lease rentals would be eliminated. However they could be short term concerns on gearing as the transaction would most likely be financed through leverage. MTNN valuation should in the long run thus improve”.
Employees of IHS Towers, Africa’s largest infrastructure company, will receive compensation and core benefits on favourable terms for up to 12 months after the proposed $2.2 billion merger with MTN Group, according to documents obtained by BusinessDay.
Also speaking on this deal, Abiola Rasaq, former head, investor relations and portfolio investments at United Bank for Africa Plc told BusinessDay that the transaction reinforces the capacity and leadership of MTN in the African Telecom space, “demonstrating its ability to fund and own infrastructure assets.”
According to him, the transaction casts doubt on the viability of the telecom infrastructure sharing model, “which many of us touted as a strategic approach towards minimizing capital expenditure (Capex) and reducing the operating leverage and cost of telecom companies in Africa”.
“Over the past 20years, especially with the pioneering model of Helios Towers in Nigeria, telecom infrastructure sharing and leasing model was seen to be an approach that reduces the need for telecommunications companies to finance towers, and afforded the opportunity to expand network at minimal cost as they only need to focus their investments on proprietary assets relevant for ensuring the reliability of their services”, he added.
Rasaq further noted that the model served a good purpose “but with MTN, which hitherto owns about 24 percent of IHS, buying out other shareholders, it shows the limited viability of the model in Africa. Notably, the likes of American Towers, Cellnex and SBA continue to prove the significance and viability of the shared infrastructure model in America and Europe.”
“This transaction may also reflect the reason for IHS’ rationalization of its capital investments over the past 3 years, when it has consistently reduced its tower sites to slightly above 39,000. Interestingly, IHS has become profitable and MTN has also recovered from losses made in previous years, so it’s a good timing for MTN Group as it can now afford to finance the acquisition through cash payment and assumption of liabilities.
“Even so MTN accounts for about 65 percent of IHS revenue, the transaction will have implication for players like Airtel which accounts for about 15 percent of IHS revenue, given its major lease of IHS’ sites in Nigeria and a few other markets. The question would be the ability of Airtel to trust MTN with its service in areas where it currently relies on IHS’ infrastructure.
“Whilst this may be a good opportunity for Helios Towers, which is the direct competitor to IHS, it may not have the capacity to immediately fill the vacuum for Airtel, give its relatively limited tower sites of under 16,000. More so, IHS is the only Tower infrastructure leasing company in Cote D’Ivoire, Cameroon and Zambia, which means that Airtel, Orange and Moov Africa, which rely on IHS services in many locations in those countries may see this transaction as a threat to their competitiveness in those countries”, Rasaq added.
Sola Oni, a Fellow of Chartered Institute of Stockbrokers (CIS) said, the deal implies a major strategic shift by MTN, reversing the long trend of African telecom operators selling off their towers to independent infrastructure companies like IHS.
“By acquiring IHS in a $6.2 billion all-cash transaction, MTN is signaling that owning critical digital infrastructure again is more valuable than simply leasing it, especially as demand for data, 4G/5G expansion, and rural connectivity continues to grow across the continent.
“The deal will also suggest increasing consolidation and competition in Africa’s tower market, with infrastructure now seen as a source of long-term power and cost control rather than just an operational expense.
“The move could reshape how telecom networks are built and priced, attract more global investment into Africa’s digital infrastructure space, and give MTN a stronger strategic position in the region’s fast-growing digital economy”, he added.
