IHS Towers: RBC Global Communications Infrastructure 2024
Executive Summary.
Provide an update on the progress of the strategic review and any potential actions around asset disposals.
Explore opportunities to further improve profitability and cash flow generation, with a focus on reaching the 60% EBITDA margin target.
Provide more details on the fiber business in Brazil, including the pace of rollout, customer traction, and plans for the future.
Discuss the potential impact of technological developments, such as 5G and AI, on IHS's core business and any plans to leverage these opportunities.
Introduction to IHS and Its Business Model
IHS is a New York-listed emerging market tower infrastructure platform with significant operations in Africa and Latin America, operating in 10 markets with around 40,000 sites; it generates $1.7 billion in revenue, $900 million in EBITDA, and aims to show that the tower business model can succeed outside developed markets by focusing on connectivity as a vital utility and pursuing higher growth rates.
Renewal and Extension of Contracts with MTN
IHS recently renewed its contracts with MTN in Nigeria, its largest customer, extending them through 2032-2035 and adding $12.3 billion in revenue; the contract mix has shifted from dollar-denominated to local currency fees and now includes diesel price indexation to manage power volatility.
Addressing Power and Currency Volatility
The new contract terms for IHS include local currency-denominated use fees, diesel price indexation to hedge against power volatility, and semi-annual CPI escalators in Nigeria, aimed at mitigating currency and power fluctuations while maintaining discounts similar to those in Nigeria.
Strategic Review and Financial Priorities
IHS is focusing on a strategic review to enhance profitability and cash flow, aiming to increase its EBITDA margin to 60% while managing growth capital expenditures; the company plans to dispose of $500 million to $1 billion in assets to showcase the value of different business segments and strengthen its balance sheet.
Capital Allocation and Asset Dispositions
IHS is prioritizing growth capital expenditures in Brazil, focusing on towers and fiber while not pursuing outbound M&A; it has a share buyback program and is considering future dividends, all while actively managing its balance sheet to enhance liquidity.
Project Green and Renewable Energy Initiatives
Project Green aims to reduce diesel reliance and meet carbon intensity targets through renewable energy solutions, having invested $214 million over three years; it is projected to save $77 million next year and has already achieved a 50% reduction in carbon intensity by 2030, with $8 million left to complete the project.
Shareholder Base and Fiber Business Update
Since going public, IHS has focused on enhancing liquidity and evolving its shareholder base; additionally, the fiber business in Brazil is progressing well, complementing the towers business and expanding fiber access to homes.
Government Support and Technological Developments
IHS is involved in government-supported rural connections in Nigeria but is primarily focused on urban areas, where it can connect towers to Metro rings; the company views 5G as a key growth opportunity in core markets, with densification and rollout expected to drive growth, and it is also exploring AI to enhance operational efficiency and create cost and revenue opportunities.
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