IHS Towers looking for buyers for Brazil operation

Telecom infrastructure company IHS Towers is looking for buyers for its Brazil business and to that end has hired JP Morgan, local daily Valor Econômico reported.

The information was confirmed by BNamericas with two market sources, although officially IHS is not commenting.

According to one of the sources, IHS Towers recently laid off employees in Brazil in both the administrative and operational areas.

The source described the company's business model in the country as somewhat “dysfunctional” because IHS operates both in the tower segment and, through its I-Systems JV with TIM Brasil, fiber optics – but the two businesses are managed separately. 

Globally, CEO Sam Darwish has faced pressure from a key investor to step down.

In a statement last September, investment firm Blackwells Capital said that since IHS Towers went public in 2021 there had been “large-scale governance, operational and strategic failings which continue to impact the value of our investment.”

Blackwells called for “urgent” leadership changes at IHS Holding Limited, including a reconstitution of the company’s board of directors and the replacing of Darwish.

The “last straw” for Blackwells would have been Nigerian mobile operator MTN Group's decision to transfer 2,500 tower contracts from IHS to rival American Tower. Nigeria is IHS's main market, followed by Brazil.

From an operational standpoint, IHS Towers Brazil’s business has not done so badly.

The company beat its sites deployment target in the country for 2023. IHS planned to deploy 1,250 new towers globally last year with approximately 750 in Brazil.

“We surpassed our expectations for new sites, having built 1,329 new towers, mostly in Brazil, with 812 in the country, as we continue to prioritize organically growing our asset base in that market,” Darwish told investors in an earnings call in March.

"We continue to make progress on the commercial front across the business as we have signed contracts with MTN in Cameroon and in Côte d'Ivoire for a further 10 years," Darwish said. 

"In Nigeria, as MTN highlighted in their most recent earnings announcement earlier this month, we continue to engage constructively with them to find ways to alleviate some of the operating pressure they are under, given our key role in running the majority of their network in the country, while also maintaining appropriate economic results for ourselves." 

The company said it ended the year with 40,075 towers in 11 countries, covering approximately 800mn people, ahead of GD Towers and SBA in tower count, regaining the third spot among the world’s largest independent tower companies by number of sites. It remains behind American Tower and Cellnex.

Elsewhere in Latin America, IHS ended 2023 with 228 sites in Colombia, flat compared with 2022. 

In Peru, its other Latin American market, its 61 sites were sold to SBA, effectively marking IHS’s exit from that market.

On February 21, IHS signed an agreement to sell its subsidiary IHS Perú to affiliates of SBA Communications. 

The closing of this transaction is pending customary conditions, including finalization of due diligence, which IHS expects to complete by June. The value of the deal was not disclosed, but CFO Steve Howden said it was "immaterial."

It is not entirely clear what the fate of the company's operation in Colombia, which is a much smaller market for IHS than Brazil, will be, nor that of the I-Systems operation with TIM.

“We don’t comment on rumors. What we’re seeing at I-Systems is demand in the Brazilian market for the [neutral network] model and we’re seeing ways to accelerate the business in the country,” I-Systems CEO Daniel Cardoso told BNamericas on the sidelines of the Innovative Carriers event in São Paulo on Tuesday. “For us, it’s business as usual.”

Prior to the sale reports, IHS said it planned to build approximately 850 towers, including 600 in Brazil, in 2024. 

The company also projected US$330mn-370mn in investments.

"The value and long-term growth prospects of the Latin America business are also very strong. When we moved to LatAm during the COVID year, we had zero base. Today, we have almost 8,000 towers and one of the largest fiber networks in Brazil, with a business that generated US$146mn in adjusted Ebitda in 2023, more than 800 new towers and 1.3mn more homes passed in 2023 alone," Darwish said in the March call.