Airtel Africa Has Decided To Sell Its Tanzanian Towers For $175m

Just about two months to this time, Airtel Africa announced that it had sold its tower units in Madagascar and Malawi. Yesterday, June 2, the Telecom provider said it has sold its tower portfolio, which is part of Airtel Tanzania, for about $175 million (Rs 1,279.6 crore). 

“This deal,” according to the company, “marks the latest strategic divestment of the group’s tower portfolio as it focuses on an asset-light business model and its core subscriber-facing operations.” 

Airtel Africa made this announcement in a statement while explaining that the sale of the tower portfolio belonging to its Tanzanian division was to a joint venture company owned by a wholly-owned subsidiary of SBA Communications Corporation.”

The tower portfolio in Airtel Tanzania comprises about 1,400 towers that form part of the group’s wireless telecommunications infrastructure network.

As part of the terms of the deal, which was reported by Business Standards, the group’s subsidiary at Airtel Tanzania will continue to develop, maintain and operate its equipment on the towers under a separate lease arrangement with the purchaser.

Airtel said that the consideration for the transaction is about $175 million. Of this, an approximate amount of $157.5 million is payable on the first closing date (expected to take place in the second half of the group’s current financial year).

The balance is payable in instalments on the completion of the transfer of any remaining towers to the purchaser, it added.

“Around $60 million from the proceeds will be used to invest in network and sales infrastructure in Tanzania and for distribution to the government of Tanzania, as per the settlement described in the Airtel Africa IPO prospectus document published in June 2019,” the statement said.

Why Is Airtel Africa Trading Its Assets? 

While giving its report, Techpoint Africa explained that a portion of the deal’s proceeds would be distributed to the Tanzanian government as part of the terms of the company’s public listing in 2019. 

“The rest is to be used for debt reduction at the group level and investment in network and sales infrastructure in Tanzania,” the reporter added. 

In 2020, Airtel Africa’s CEO, Raghunath Mandava, stated that he plans to sell approximately 4,500 towers in five countries: Chad, Gabon, Madagascar, Malawi, and Tanzania.

“The move aimed to reduce the company’s $3.5 billion debt and prepare for upcoming bond repayments”, Techpoint Africa told us. 

The telecommunications giant has recorded significant losses in India because of low data prices and high competition among telcos. There is also the considerable cost of the infrastructure associated with running a telecoms business. 

However, there is a growing trend of asset-light telcos focused on core network and services provisions like calls and data services with third-party providers tasked with providing last-mile access. This results in a reduction in operational and maintenance overhead. 

An example of a company divesting its assets is the Indonesian telco XL Axiata which has sold 6,000 radio towers since 2014. 

In 2020, the Lagos State Government also moved to provide the infrastructure that telcos can latch on to provide telecommunications service to customers through its partnership with Western Telecommunications and Engineering Services Metro Limited.

It appears that Airtel is choosing to go this route as it aims to reduce its debt and increase competitiveness.