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Ooredoo’s PIF deal is the latest in the ‘big telco tower sell-off’

TASC Towers will continue to operate independently with a board of non-Zain majority members Reuters
TASC Towers will continue to operate independently with a board of non-Zain majority members
  • Investors mull acquisition of Ooredoo’s 20,000 tower network
  • Qatari firm’s towers worth $3bn to $5bn
  • Saudi PIF plans to make offer via Tawal arm

State-owned Qatari telecoms firm Ooredoo’s planned sale of nearly 20,000 towers has attracted bids from some of the biggest names in the business.

American Tower Corp, IHS Holding, Helios Towers and Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), are all competing for the acquisition, according to reports by Bloomberg

The newswire cited sources, who noted that talks are ongoing with bids due imminently. 

The potential Qatari deal is just the latest in a growing trend for investment opportunities to buy towers within the telecommunications industry.

“The big telco tower sell off is gathering pace in all corners of the globe,” Paolo Pescatore, a London-based telecoms analyst at PP Foresight, told AGBI. 

“It’s about efficiency. All telcos are struggling to generate new forms of revenue. Margins continue to be squeezed due to the rollout of next-generation networks, and people are reluctant to spend more on connectivity.

“The move helps satisfy shareholders and provide much needed cash on the balance sheet.

“We are in a golden era of connectivity. Therefore, it represents a good time to sell off what was once a prized asset.” 

Ooredoo’s tower assets, located in the Gulf and other markets, including Iraq and Algeria, may be valued at $3 billion to $5 billion, according to market estimates. 

The Qatari telecom operator announced plans to sell its network of towers in September as part of a shift to an asset-light model. The same month, it sold its Myanmar business to Singapore’s Nine Communications for an enterprise value of $576 million and total equity consideration of $162 million.

“Ooredoo has been vocal about its desire to lighten its assets. ‘It will do so wherever it’s able to get some decent valuations and a business case,” Nishit Lakhotia, head of research at Sico, a leading regional investment bank headquartered in Bahrain, told AGBI.

“Ooredoo needs to divest assets because it has considerable debt that it would want to reduce given rising interest costs. It has hedged a sizeable part of it so that it is less exposed, but some matures in 2023-24, which it will either have to refinance or pay off,” he said.

“Towers are low hanging fruit in terms of divesting passive infrastructure.”

Ooredoo telecoms towerReuters
Ooredoo’s tower assets, located in the Gulf and other markets, may be valued at $3bn to $5bn. Picture: Reuters

Ooredoo’s move forms part of a broader trend of Gulf telcos divesting from tower assets in recent years to reduce infrastructure costs and focus on information and communications technology (ICT), with such deals attracting specialised tower operators.

Omantel sold 2,890 towers to Helios Towers for $575 million in 2021, Kuwait’s Zain sold 1,620 telecoms towers to IHS Holding for $130 million in 2020, while Saudi Telecom spun off its 15,000-plus towers into a subsidiary called Tawal in 2019. 

“It used to be a key advantage for a mobile operator to deploy towers and achieve coverage where there were no other operators,” Dubai-based Alan Omnet, COO of World Mobile, told AGBI. 

“However, now as mobile networks have achieved national coverage, this advantage is no longer there. So, it makes sense to reduce the infrastructure cost and share infrastructure with other operators.” 

Sico’s Lakhotia agreed that for Gulf telcos, such as Ooredoo, selling their tower networks is a sensible strategy given the evolving telecoms landscape. 

“It makes sense for them to divest and deploy that money to lower their leverage and do essential capex on the next growth area of telecoms – whether that is next generation technology, data centres, fintech or fibre-related infrastructure – to gain a strategic advantage in getting new customers onto their network,” Lakhotia said.

“ICT remains a strategic priority of regional governments, so all the Gulf telcos, especially incumbents, are expected to invest in the latest infrastructure to provide an edge to businesses and consumers.

“There’s a lot of pressure on each of these telcos to be the first one to roll it out,” he added. 

At the same time Saudi Arabia’s PIF has been noticeably ramping up its acquisition of towers. 

On October 25, Saudi Telecom Company (STC) said PIF had made a non-binding offer to buy 51 percent of its towers business, valuing the latter at almost $6 billion.

Telecom Towers Company (Tawal), fully owned by STC, is valued at SR 21.94 billion ($5.84 billion), STC said.

Earlier this year PIF led a consortium to buy a majority stake in mobile telecommunications company Zain Saudi Arabia’s towers infrastructure for just over SR 3 billion, renaming the unit Golden Lattice Investment Company.

Sico
“Ooredoo wants to lighten its assets,” said Nishit Lakhotia, head of research at Sico regional investment bank

“PIF is focusing on building a sizeable tower portfolio – not just across the GCC but across the Mena region,” said Lakhotia.

“The fund has different mandates to invest in different types of assets – both within and outside the region. It is investing in certain long-term projects such as Neom while, on the other hand, investing in something like telecom towers can provide it with a regular income every year.

“Towers are essentially a utility business – the more tenants you have, the greater your returns. They provide a steady income so long as your tenants are paying on time.”

Kuwait’s Zain is another Gulf telco that is currently looking to divest more of its tower network. 

In December 2021 Zain signed a 15-year agreement with the UAE’s TASC Towers for the sale and leaseback of 2,607 towers in Jordan, as part of an $88 million deal aimed at helping to fund network and technology upgrades. 

This followed on from the earlier deals mentioned above – both the sale of 1,620 towers in its home market to IHS Holding in 2020 and the sale of more than 8,000 towers in Saudi Arabia to the PIF. 

Zain is now reportedly looking at selling tower assets in both Sudan and Iraq. 

Lakhotia expects increased international interest in the sale of future Mena tower assets. 

“The region has a well matured infrastructure along with a stable currency pegged to the dollar. I think a lot of international companies will also be interested in investing,” said Lakhotia. 

Omnet is more circumspect about the future viability of towers as assets. 

“If you look at it from the viewpoint of the short to medium term then it may make sense,” he said. 

“However, with the changes to network coverage through decentralised networks, launch of LEO [low earth orbit] network constellations, introduction of aerial assets such as aerostats and stratospheric platforms, as well as the move to 5G networks with reduced range and higher density networks, then the traditional tower revenue model is not assured in the long term.

“As operators move to an asset light business model, we are likely to see the sale of other assets such as real estate, data centres, satellite stations, offices, fibre networks.”

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