A year after his company’s blockbuster US$2.6bn fundraising, IHS Towers co-founder Issam Darwish talks infrastructure sharing, regulation and consolidation.
A year after his company’s blockbuster US$2.6bn fundraising, IHS Towers co-founder Issam Darwish talks infrastructure sharing, regulation and consolidation.
Claire Landon: IHS Towers has quickly grown into an established business, with big name investors such as Goldman Sachs. Can you tell us about the origins of company?
Issam Darwish: We started in 2001, when William Saad, my brother Mohamad Darwish and I started building tower sites. It was an exciting time as Nigeria had just privatised its telecoms sector, MTN was beginning its continental expansion and Econet was emerging as a new player. Three or four years later, we began operating tower sites.
I would say our induction period lasted eight or nine years, during which we learned about everything from power sources to engineering capability and security – challenges which numerous businesses operating in Africa face today. In 2008/9 we raised US$79m and started our build-to-suit programme – at that point, scale was easy.
We’ve gone from few sites to 23,300 in five markets (Nigeria, Cameroon, Cote d’Ivoire, Rwanda and Zambia) today. I am proud to say that for 15 years we have been building and managing towers that are the essential backbone of mobile telecoms in Africa – the leapfrog technology driving economic development, prosperity and self-sufficiency across the continent. Today, we are the largest mobile telecoms infrastructure provider in EMEA.
CL: Why did you choose Africa, and would you consider expanding beyond there?
ID: It’s an exciting region, with a median age of 20 and a population that is expected to double. The GSMA predicts that 80% of the 800 million people in sub-Saharan Africa will have a mobile device by 2020 – two times more than today. Smartphones are now selling for £50 (US$76) or less, so what’s now needed is increased service and network uptime. We have enough to do in Africa, but if an opportunity presents itself outside the continent, we’ll take a look.
CL: There has been talk of eventual consolidation among Africa’s independent towercos – IHS, Eaton Towers, Helios Towers Africa (HTA) and Helios Towers Nigeria (HTN). What do you think is the opportunity?
ID: We, as towercos, are too few, and the opportunity remains vast. We do not necessarily compete, in the traditional sense of the word, and we talk all the time. I sometimes wonder why there aren’t more players, but then again, I remember the complex challenges involved with setting up a new towerco and how no two markets are the same.
That said, in some countries, it doesn’t make sense to have three or four towercos operating in one market. So in markets such as Ghana, where American Tower, Helios and Eaton Towers are present, there could be room for consolidation.
The next trigger could be the issuance of LTE spectrum, which will likely cause MNOs to build more towers. Our towers are ready and waiting for this to happen.
CL: When HTN cancelled its IPO, it said it had received takeover interest. Is that something IHS, which is present in Nigeria, could look at?
ID: I can’t comment. HTN are our friends and we don’t want to disrupt their plans.
CL: African countries seem to be at the start of a new phase in which infrastructure sharing could become mandatory. What does this mean for towercos such as IHS?
ID: Cameroon has already said that new towers may not be built if not within a certain distance from existing towers. Côte d’Ivoire, for its part, has issued a fourth licence, so the new operator will most certainly have to share infrastructure. These same trends are also happening in Nigeria and Rwanda.
In my opinion, the biggest driver for increased sharing is an economic one: the MNO saves money, the user pays less, diesel emissions are reduced and less capex is spent, which is better for the economy overall. Regulators understand this domino effect.
Active infrastructure could eventually be rolled out, most logically in rural areas, but markets must first become more saturated.
CL: What’s it like competing with American Tower, which is a global giant?
ID: We all think rationally. The Africa opportunity is so big, we don’t have to lock horns. We respect each other, we’re friends and we talk regularly.
In each of our five markets, apart from Nigeria, which is also home to HTN and American Tower, we’re the only major player. We’re working hard to remain the number one.
CL: Do regulators mind there being a single player per market?
ID: No, our contracts are crystal clear. It makes economic sense since we have more than one client.
CL: What is the scope for consolidation among African operators?
ID: The market is too big, and MNOs have an enormous amount of growth ahead of them. But everything is possible.
CL: Is IHS going to bid for either of the tower portfolios being sold by Mobily and Zain?
ID: I can’t comment on that, but I can say that the Saudi environment is ready for a few deals. It’s a great opportunity – the geography is massive and the economy is strong, despite oil prices being at US$40 per barrel.
CL: There is increasing crossover between towers and fibre in the US. What is the fibre opportunity for IHS?
ID: LTE won’t happen properly without fibre, but towers and fibre each have a different business model when it comes to tenancy and IRUs (indefeasible rights of use).
We are thinking hard about how to take part in this opportunity, because it does have to happen in Africa. I do expect some big developments in fibre in the coming years.
CL: To what extent is IHS active in CSR?
ID: We have numerous ongoing CSR initiatives in each of the five markets in which we operate. One of the ways in which we’ve given back is by encouraging former employees to set up businesses that help to serve us, on an exclusive basis. We effectively employ 40,000 people directly and indirectly through our exclusive subcontractors, and have enabled hundreds of local SMEs to succeed.
As a personal project, I seek to promote entrepreneurship through funding and mentoring young CEOs. I’ve also helped to set up schools that educate underserved parts of the African population –we’re currently working on a new project which is focused on refurbishing a girls’ school in northern Nigeria.
CL: A year ago, you raised US$2.6bn (US$2bn in equity, and a US$600m loan). What are IHS’ plans for future fundraising, either via an IPO or further equity/debt raises?
ID: We could potentially list in the future but there are no specific plans around that yet. We’ll update the market when the time is right – it would have to be a prime listing in a major market.
For now, we have all the money we need, from a group of very solid shareholders. However, we would consider further fundraising if the right opportunity came along.
