Out-Law / Your Daily Need-To-Know

Africa’s telecoms infrastructure set for boost as data services demand grows

Out-Law News | 22 Jul 2014 | 10:37 am | 2 min. read

Africa’s leading independent telecoms tower company Helios Towers Africa (HTA) has said it will use a new stream of capital injected into the company to boost infrastructure capacity on the continent to cater for “growing demand” for 3G and 4G data services.

HTA said it has raised $630 million in new equity resources from existing and new shareholders and "expects to complete negotiations shortly" on new and extended debt facilities of more than $350m “with a strong syndicate of international and local lending institutions”.

The company suggested that it could also use its “financial firepower” to break into new markets.

HTA said following the latest injection of capital into the business, it will have raised more than $1.8 billion in external financing since inception in late 2009. This will “fund acquisitions and organic growth” with regard to the African telecoms towers industry “in which there continues to be huge potential”, the company said.

According to HTA, “growth drivers underpinning the telecoms towers industry continue to be robust”. “There is a need for 100,000 points of service (PoS) in Africa to merely satisfy demand for 2G coverage and associated capacity demand over the next five years. This PoS requirement is underpinned further by the growing demand for 3G and 4G data, which is driving the need for significant additional infrastructure capacity and in-fill across the continent.”

HTA chief executive officer Chuck Green said: “The market opportunity is as compelling as ever and this new capital injection will help us to consolidate our pan-African vision and market leading position even further. We now have over 7,800 owned towers in Africa and the financial firepower to enter more new markets.”

In a related development India-based Bharti Airtel Limited (Airtel), a leading global telecommunications services provider with operations in 20 countries across Asia and Africa, has agreed to divest about 3,100 of its telecoms towers in four countries across its African operations to HTA.

Airtel will retain “full access” to the towers under a long-term lease contract. HTA said the agreement allows Airtel to “focus on its core business and customers (and) enable it to deleverage through debt reduction, and will significantly reduce its ongoing capital expenditure on passive infrastructure”.

HTA’s existing shareholders include Quantum Strategic Partners, Helios Investment Partners, Albright Capital Management, RIT Capital Partners and the International Finance Corporation (IFC), which is part of the World Bank Group.

The head of IFC’s African, Latin American, and Caribbean Fund Sujoy Bose said: “We are very pleased to enter into a partnership with HTA and its investors. HTA is well-positioned for growth in several under-penetrated markets in Africa and the Airtel transaction is another demonstration of the company’s credibility with large operators in the mobile telephone industry.”

According to a survey published earlier this year by Swedish company Ericsson (8-page / 224 KB PDF), sub-Saharan Africa is “rapidly closing in” on the global penetration rate of mobile communications usage.

The survey said mobile financial services are increasingly popular as the use of information and communications technology (ICT) grows. However, the survey said: “Mobile operators and relevant ICT stakeholders, including governments, must drive the development of appropriate infrastructure to handle the growing traffic demand on networks.”

In May 2014 the International Finance Corporation (IFC), a member of the World Bank Group, announced a $2m advisory services agreement with Tigo Ghana to develop and expand mobile financial services in Ghana. The project is part of the Partnership for Financial Inclusion, a joint $37.4m initiative of IFC and The MasterCard Foundation to expand microfinance and extend mobile financial services in sub-Saharan Africa.

The African Union’s ‘action plan’ for Africa up to 2015 (104-page / 1.53 MB PDF) said access to advanced ICT is critical to the long-term economic and social development” of the continent.

“It has increasingly become essential that appropriate ICT infrastructure, applications and skills are in place and accessible to the population to close the development gap between Africa and the rest of the world,” the plan said.