IHS, the largest tower company in Africa, may lose an eight-year-old N380 billion contract after MTN Nigeria required the deal to be denominated in the local currency, the naira.
IHS controls many MTN Group tower assets in different parts of Africa including Nigeria. In 2014, IHS acquired 4,154 towers from MTN Nigeria and a further 4,696 towers in 2015. The transaction value of the deal was $52 billion.
The contract, which followed the acquisition of over 9,000 towers belonging to MTN in 2014, was denominated in dollars, but the recent depreciation of the naira and the acute dollar shortage in Nigeria are compelling MTN to force a change in the way the contract with IHS is priced. The tower service contract is arguably MTN’s largest single-cost item.
When the contract was first agreed almost 10 years ago, N160.37 fetched one US dollar on the official market but today MTN would require nearly three times as much in the local currency to buy one dollar where it is available. In the same way, the dollar value of MTN’s annual revenues has fallen by the margin of naira’s devaluation since 2014.
BusinessDay learnt that MTN has told IHS in unclear terms that it could consider terminating the contract if an agreement on the dispute cannot be reached quickly.
IHS recently went public on the New York Stock Exchange, which saw its valuation hit over $5 billion. The 9,000 towers from MTN Nigeria are more than 50 percent of IHS’ tower assets in Nigeria at 16,522 towers. As of June 30, 2021, IHS operated 30,207 towers across five countries in Africa, three countries in Latin America, and one country in the Middle East.
BusinessDay reached out to IHS for comments but a spokesperson for the company declined to comment on the deal.
Olusola Teniola, former president, Association of Telecommunication Operators of Nigeria (ATCON), says while it is within the rights of parties in an agreement to seek to renegotiate a contract, there are also clauses to respect. In the case of MTN Nigeria and IHS, the contract is long-term and it is one that is often renewed after a duration of 10 years. Teniola says he is confident both parties would resolve the challenge.
MTN holds 85,176,719 ordinary shares of IHS Towers, representing about 20 percent of the tower company, as a result of the IPO.