IHS plans to inject fresh $500m to grow capacity
In less than two decades of telecoms sector liberalisation in Nigeria and licensing of Global System of Mobile communications (GSM) operators, subscribers’ number have gone up while teledensity has also passed the 100 percentage point. But there are still challenges. Mohammed Darwish, managing director, IHS Towers, says the availability of broadband services will help address some of these challenges. He says the firm will soon inject another $500million into the business after raising some $2.5billion to finance expansion drives. Darwish spoke with biztecafrica.com Nigeria’s portal editor, KOKUMO GOODIE in Lagos.
Over the last one decade of post-liberalisation of telecoms industry in Nigeria has seen growth. What is the most significant you have noticed?
Africa’s population is just over one billion and is set to double over the next 40 years. This rise in population is more affluent, mobile and connected than ever before. Nigeria alone has around 170 million people in it. As one of the world’s fastest growing economies, as well as being the largest African economy, surpassing South Africa, Nigeria is leading this change.
The country’s economic fundamentals are very attractive to mobile network operators and infrastructure companies. Nigeria is Africa’s largest mobile market with more than 140 million subscribers and a market penetration of around 75 per cent and it is still growing year-on-year, effective penetration rate could be lower due to the fact that it is common for average Nigerian to carry more than one phone with him.
In your view, are MNOs doing enough to address service quality issues in Nigeria?
Currently IHS manages around 15,000 towers in Nigeria and over 21,000 towers in Africa. IHS is planning to invest roughly $500 million and we already recruited around 400 workers (mostly engineers) in 2014 as we expand network capacity into new territories as well as improving quality and reliability. At IHS, we also invested over $10 million in 2012 and planning to double the amount, into developing the most advanced network operating center (NOC) in the country – this gives us 24/7 awareness and data capture of tower performance driving constant improvements in uptime and energy consumption. IHS has worked hard to exceed 99.9 per cent network uptime across the continent, even in areas where electricity does not exist and sites depend on diesel generators; we will bring the same commitment to the newly acquired towers in Nigeria. IHIS raised more than $2.5 billion last year to finance the expansion of its portfolio and upgrade.
OTT is eating deep into the revenue of MNOs, what are the implications of this on the industry?
If we want to simplify the issue, such companies require reliable data networks to perform such services, and broadband is what Africa presently lacks more than voice. IHS has been investing in tower acquisitions across the country.
IHS has acquired towers from MNOs in Nigeria and Africa. In the light of what is happening now, what economic sense does that make?
At the end of 2014, IHS completed the acquisition of 9,151 of MTN Nigeria and 2,136 of Etisalat towers in Nigeria respectively. We also acquired about 1,500 sites from Airtel in both Rwanda and Zambia. The transaction will reduce MTN and Etisalat Nigeria’s operating costs, drive network efficiencies and further expand MTN and Etisalat’s voice and data capacity.
Opening the largest tower portfolio in Nigeria to all other mobile operators, internet service providers, LTE/WiMax providers, who previously had no chance to provide that much coverage. Any savings that mobile network operators (MNOs) generate through the more efficient running of their tower operations by IHS are indirectly passed over to the consumer in the country, through overall reductions in mobile pricing. Our core business is to run an efficient and effective network. Mobile network operators outsource their tower portfolios to IHS creating three significant and almost immediate benefits: These include: for the customer: the network improves, uptime increases to over 99 per cent and the network expands through sharing towers with other networks. For the mobile network operator: costs are stabilised and capital is released to spend on improving the network and developing products for customers; and for Africa: wider, more reliable and efficient networks, built and maintained by professionals, promoting economic growth and protects the environment.
In a country such as Nigeria where petroleum products prices continue to increase, how is IHS coping with the cost of running the towers?
Most of IHS towers are diesel operated and there hasn’t been a drop in price for the commodity in recent times. In terms of a drop in the price of oil, we have agreements with our clients where we are hedged against any increase or drop in the price of diesel which protects us. Many of our sites are equipped to last many hours without generators; however to safeguard our operations against the scarcity of diesel we have many measures in place such as partnering with large importers, having our own depots, etc.
How far can renewable energy go in addressing Nigeria's peculiar power challenge?
Solar is an important way in producing power, but to address Nigeria’s power challenge I think is not highly probable. We do use solar energy systems a lot on our sites, but their use depends on many factors.
A new government is in the saddle. What do you suggest should be done to promote the ICT industry in Nigeria?
The government and telecom regulator are doing lots of initiatives to improve the ICT sector in Nigeria. As the tower business is environment-friendly (through the reduction in carbon dioxide emissions, or lower use of natural resources), and ultimately serves the end user by providing cheaper infrastructure solutions to the mobile operators whom in turn can pass some of these savings to subscribers and population, regulators have not forced the operators to prioritise the use of co-location sites, but they went a long way in encouraging the operators to do so. As operators are going more and more into rural areas, regulators are working in bringing the operators together and encouraging them to align expansion plants into rural areas.
What are the latest technologies available on the stable of IHS Towers?
The first is our systems integration and optimising our supply chain. We have developed a revolutionary ten year supply and efficiency contracting model with respective original equipment manufacturers (OEMs) and vendors which has dramatically improved the quality and up time of tower management.
We work with OEMs to produce improved design solutions based on existing technologies such as solar, DC generators, batteries. OEMs supply equipment and technicians to run the equipment on a ten year contract [we can break the contract at 3-4 years if they are not performing]. Over 3,000 jobs have been created in this way. The contract includes the replacement of equipment by the OEM or vendor as it wears out. Through optimising our supply chain in this way, IHS has refurbished its entire portfolio in 18 months over the usual three years it would take using legacy models. And, we have reduced our operating costs by 50 per cent. The second is our green energy initiatives aimed at reducing our towers’ dependence on diesel. These initiatives include projects in Nigeria, Zambia and Rwanda.
What is IHS' level of operations in Nigeria and the African continent?
Currently, IHS manages around 15,000 towers in Nigeria and over 21,000 towers in Africa.
Do you have plans to diversify into other fields such as mobile phone production?
IHS is a leader in telecommunications infrastructure sharing and leasing; where we still see huge growth in this sector and we are focused to keep growing our business.
What are your short, medium and long term plans?
IHS is committed to developing our people and the communities we serve, and to help people and businesses across the region build a powerful and prosperous future, by Africa and for Africa.