As reported by TowerXchange, the agreement marks a step forward for both companies, following a challenging period of economic instability and strained relations.
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Nigeria's economic turbulence, marked by a devaluation of the naira and skyrocketing diesel prices, has put pressure on businesses operating in the country.
IHS Towers, which generates over 60% of its revenue from Nigeria, has been particularly affected.
The recent lease renewal with MTN, however, signals a move towards stabilising operations across the West African nation, TowerXchange says.
The revised agreement not only extends the existing leases but also adjusts financial terms to better reflect the current economic climate.
The new terms include a reduction in the USD-indexed component of the leases, making them predominantly naira-linked, and the introduction of a diesel price index to hedge against fuel cost fluctuations.
This approach aims to mitigate the macroeconomic risks that have plagued both IHS Towers and MTN in recent years.
A strained relationship
The relationship between IHS Towers and MTN has been fraught with tension over the past two years.
In mid-2023, MTN, holding a 26% stake in IHS, sought greater influence on the board, a move that was rebuffed by IHS to maintain its neutrality among customers.
This disagreement was compounded by MTN's decision not to renew contracts on 2,500 sites with IHS, opting instead for competitor ATC Nigeria, a subsidiary of American Tower.
This decision, reportedly based on ATC Nigeria's superior bid, had significant financial repercussions. IHS Towers saw its shares decline, which in turn impacted MTN's market capitalisation.
Despite this, ATC Nigeria now faces the challenge of building new sites and upgrading existing ones to accommodate the new tenancies, a costly and resource-intensive process.
The latest agreement between IHS Towers, MTN Nigeria, and ATC Nigeria revises the allocation of the 2,500 sites previously contested.
ATC Nigeria will now manage approximately 2,100 sites, while IHS will oversee 1,430 sites, including 1,000 new sites to be developed in the coming years.
This compromise is seen as a positive development for IHS Towers, allowing the company to retain a significant portion of its original tenancies.
For MTN, the deal provides much-needed stability in Nigeria, its largest market, where it has faced rising operational costs due to the naira's devaluation and increased fuel prices.
The new lease terms, particularly the adjustments related to diesel costs, will help MTN manage these financial pressures more effectively.
American Tower, despite losing out on some tenancies, benefits from retaining the less capital-intensive sites and can redirect resources to other clients in Nigeria, such as Airtel.
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