Leading independent tower company, IHS Towers, has recently undertaken a significant reduction in its workforce, terminating the employment of over 100 staff members. According to a Techcabal report, this decision comes as the company grapples with the financial strain caused by the devaluation of the Nigerian currency, which has had a substantial impact on its profit margins. Nigeria stands as the largest market for IHS Towers, and the economic downturn in the country has had a direct effect on the company’s operations.
An individual with intimate knowledge of the company’s internal affairs disclosed that the layoffs were widespread, spanning various departments within the organization. The network surveillance team and a number of senior employees, many of whom have dedicated over ten years of service to IHS Towers, were predominantly affected by this downsizing.
According to the source, those senior employees who were laid off received “significant” severance packages. The company clarified that the layoffs were not a reflection of the employees’ performance but rather a consequence of the economic challenges facing the company. As of the time of reporting, IHS Towers had not provided an official response to inquiries regarding the layoffs.
The financial difficulties for IHS Towers have been mounting since 2022, with investors expressing concern over the company’s lackluster financial results. The final quarter of 2023 saw the company incur a loss of $409 million, attributed largely to the devaluation of the Nigerian naira, which not only reduced revenue but also led to foreign exchange losses stemming from U.S. dollar-denominated loans.
With a current workforce of 1,600 individuals, IHS Towers reported a staggering loss of $1.9 billion for the year 2023, marking a 304% increase from the losses it suffered in the previous year. The company’s market capitalization has dwindled to $1.3 billion, reflecting a sharp decline of $6 billion since 2021.
Despite a slight recovery in its share price in August to $3.56, following a dip to $2.98 in July, the company’s stock is still trading significantly lower than its peak in 2021, when shares were valued at $21. This indicates the ongoing financial challenges that IHS Towers is facing in the current economic climate.
IHS Towers, a major player in the telecommunications infrastructure industry, operates a significant portion of Africa’s tower infrastructure, with over 40,000 towers across the continent. This accounts for approximately 25% of all the towers in Africa. The company’s business model involves leasing these towers to telecommunications companies such as MTN and Airtel. The presence and functionality of these towers are essential for the advancement of Africa’s digital economy, as they form the critical infrastructure required for reliable internet connectivity.
Despite the critical role IHS Towers plays in supporting digital connectivity, the company has been facing a series of economic challenges. Key factors contributing to these difficulties include the escalating costs of fuel, which is necessary for powering the towers, as well as rising maintenance expenses. In addition, the company has had to contend with the effects of inflation and foreign exchange (FX) volatility, particularly in Nigeria, which is a major market for IHS Towers, contributing over half of the company’s sales and revenue.
The first quarter of 2024 saw the company’s financial burden increase, with power expenses amounting to $88.8 million, making it the largest operating cost for the business. This financial pressure has been a source of concern for investors and stakeholders.
One shareholder voiced their concerns in a letter dated June 2023, pointing out that while the company had utilized more than $1.5 billion in cash for investing activities in the previous year, the specific details of these investments were not clearly itemized or explained in the company’s publicly released statement of cash flows. This lack of transparency raised questions about the company’s financial management and investment strategies.
Adding to the financial strain, Gimba Mohammed, the director of government and external relations at IHS Towers, revealed at a conference in August that the company had incurred costs exceeding ₦14 billion to repair fibre cuts between 2022 and 2023. These repairs are necessary to maintain the integrity and functionality of the network infrastructure but represent a significant expense for the company.
The combination of these factors—high operating costs, economic instability, and substantial repair expenses—has placed IHS Towers in a precarious financial position, threatening the sustainability of its business operations in the face of a challenging economic environment.
