Ooredoo, Zain combine tower assets in MENA

Telecoms operators Ooredoo and Zain are joining forces with independent tower company TASC Towers to create what they claim will be the largest tower company in the Middle East and North Africa (MENA) region.

The three groups announced they had signed definitive agreements to combine their tower assets in a cash and share deal.

The enlarged tower company, comprising approximately 30,000 towers, will have an estimated combined enterprise value of US$2.2 billion.

The tower merger includes towers in Algeria and Tunisia in Africa, and in Qatar, Kuwait, Jordan and Iraq in the Middle East. Ooredoo's tower network in Oman will follow a standalone process.

Ooredoo and Zain will retain a 49.3% stake each in the newly restructured entity, through an asset and cash equalization process. The founders of TASC will retain the remaining shareholding, through Digital Infrastructure Assets LLP, and will continue to manage the operations of the business.

The tower entity is expected to achieve run-rate revenues of close to $500 million annually, with earnings before interest, tax, depreciation and amortization after leases (EBITDAaL) of over $200 million annually upon the completion of closings in all the individual countries.

"This financial position underpins the promising prospects and profitability of the newly restructured tower company," the companies said in a joint statement.

The groups believe the deal is a major milestone toward realizing key aspects of both Ooredoo and Zain's strategies, focused on evolving into smart telcos and creating value-focused portfolios.

Creating a MENA tower giant

In a joint commentary, Ooredoo MD and Group CEO Aziz Aluthman Fakhroo, Zain Vice-Chairman and Group CEO Bader Al-Kharafi, and TASC Founder and CEO Iyad Mazhar said the deal will result in the establishment of the region's largest independent tower company, "placing the MENA region on the world telecom tower map."

"It also positions the region as an advanced player in the global telecoms landscape, and we anticipate wide-ranging positive implications for the region – from economic growth and upgraded connectivity to technological improvements and increased global relevance," the CEOs said.

"This strategic transaction will unlock significant shareholder value through higher earnings multiples, as well as ensure capital efficiency, optimising balance sheets for our respective companies and creating new possibilities for investors," they added.

The tower merger aims to help Ooredoo and Zain realize their aspirations of evolving into smart telcos and creating value-focused portfolios. (Source: pch.vector on Freepik)

As an independent tower company, leveraging the combined assets of Ooredoo and Zain, TASC will offer Passive-Infrastructure-as-a-Service (PIaaS) in a partnership model.

This intends to create opportunities for all mobile network operators, offering a capital-efficient alternative to building, owning and managing their own passive infrastructure.

The partnership model seeks to reduce costs, lower carbon emissions and address the increasing demand for sites driven by double-digit growth in mobile data consumption across the region.

Both Ooredoo and Zain will retain their respective active infrastructure, including wireless communication antennas, intelligent software and intellectual property with respect to managing their telecom networks.

The transaction is expected to be completed in 2024, subject to all necessary regulatory approvals.

African tower trends

There has been a rising trend of operators in Africa selling tower assets in favor of roaming on partner networks or leasing back services from tower companies as a way to spend less money on infrastructure and rather become a wholesale buyer of capacity and services.

In June 2023, South African operator Cell C completed its network migration to partner towers.

Last month, Telkom South African said it was in negotiations to sell its masts and towers subsidiary Swiftnet.

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In November 2021, MTN said it would sell over 5,700 towers in South Africa to IHS Towers for $413 million.

Similar deals to sell and lease back tower infrastructure have been done by Airtel in Madagascar and Malawi.

*Top image source: aopsan on Freepik.

— Paula Gilbert, Editor, Connecting Africa