IHS Towers cuts capex, completes Peru exit and ‘reorganizes’ Brazil business

IHS Towers completed its exit from Peru during the second quarter this year, as the telecom infra firm continues to cut costs and investments, and seek greater efficiencies in its operations, including through new market divestitures.

IHS has been sounding out the market about a potential investor in its Brazil business, as BNamericas previously reported.

For now, the firm’s management claims to remain committed to its biggest Latin American operation, but say that a sale is not ruled out depending on the price and conditions.

“We remain committed to Brazil, which is our second largest market and one of our fastest-growing. We continue to drive strong operational results there and see significant ongoing growth opportunities,” CEO Sam Darwish told analysts and investors in a Q2 earnings call.

During the quarter, IHS completed the sale of its subsidiary IHS Perú, including its 61 sites, to affiliates of SBA Communications. The deal had been announced in February.

Also in Q2, IHS “reorganized” its Brazil operations by increasing the integration of the tower and fiber businesses, said Darwish. 

In 2021, when it already leased towers to telcos, IHS acquired control of TIM Brasil’s secondary fiber network in a deal that led to the creation of the neutral fiber joint venture I-Systems.

However, IHS’s business model in the country was seen as somewhat “dysfunctional” because the tower and the I-Systems fiber businesses were managed separately and without due synergies, a market source told BNamericas earlier this year.

“This [increasing the integration] will provide not only cost efficiencies, but also speed-to-market benefits as well,” the executive said.

Looking ahead, IHS aims to raise between US$500 million and US$1 billion from asset dispositions and the CEO said the company continues to examine its portfolio of markets.

The proceeds will be used to reduce debt and eventually share buybacks and/or the introduction of dividend policies. 

“We continue to focus on increasing our operating profitability and substantially reduce our capex to improve cash flow generation. We are assessing group-wide costs and capex structures, including how we can include more technology, especially AI, into our ways of working,” Darwish said.

LATAM REVENUES

IHS's revenues in Latin America fell by 3.9% year-on-year to around US$47mn in Q2.

The business was hurt by FX effects and a US$5.3mn reduction in revenues related to Oi, whose mobile operation was sold to competitors Telefônica Brasil, TIM and Claro.

In addition to Brazil, its second market worldwide after Nigeria, IHS’s other business in the region is Colombia. 

At the end of Q2, the group had 7,951 towers in place in Brazil and 243 in Colombia, of 40,332 worldwide. 

Tenants (leasers per sites) in Latin America increased by 661 year-on-year, including 927 from new towers and 215 from colocation, which consists of space leased on existing towers.

These were partially offset by a loss of 424 users to competition (churn) and 57 related to net divestiture, primarily due to the disposal of the Peruvian towers.

Globally, IHS said it built 207 towers in Q2, including 136 in Brazil. 

Since January, the number of new towers deployed in Brazil was 294 and the company’s 2024 guidance is that it will deploy approximately 600 towers in the country.

In Colombia, the tower count increased by 15 in Q2 after remaining flat in Q1.