Forex Crisis: MTN Nigeria renegotiates tower lease agreement with IHS to cut costs

BY MOTOLANI OSENI

MTN Nigeria has decided to renegotiate its lease agreements with IHS, in its effort to support the recovery of its capital position.

Recall that, MTN Nigeria said, it had awarded about 2.5k network sites that were initially under IHS portfolio to ATC Nigeria.

Further to the Extraordinary General Meeting (EGM) held on 30 April 2024, MTN Nigeria notified the Nigerian Exchange Limited and the investing public that the Company and IHS have successfully renegotiated binding commercial terms of the existing infrastructure sharing and master lease agreements.

This was one of the initiatives outlined at the EGM to support the recovery of our capital position.

According to MTN Nigeria, the revised terms with IHS Nigeria, substantially reduce the US dollar-indexed component of the leases linked to a discounted US consumer price index (CPI), making the leases majority naira-based, as well as set a cap for the naira CPI escalator component. They also remove technology-based pricing, allowing payments for new upgrades based on tower space and power, it added.

The terms of the amendments are effective from 1 April 2024, and the existing contracts have been extended to 31 December 2032. Prior to the renegotiation, the site leases expired variously between December 2024 and December 2029, with the majority expiring in 2029.

“The renegotiated agreements incorporate an energy cost component indexed to the cost of providing diesel power; however, the terms also provide for some discounts and incentives over the life of the contracts. The renegotiated terms aim to mitigate macro risks affecting our business as well as support margin recovery and the resolution of our negative equity position,’ MTN Nigeria averred.

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In addition, MTN Nigeria, ATC Nigeria Wireless Infrastructure Solutions Limited (ATC) and IHS (the Parties) have reached a mutual agreement regarding the approximately 2,500 sites that were awarded to ATC from the IHS portfolio, per our announcement on 7 September 2023. Following trilateral discussions commenced in Q2 2024, the parties have agreed to a revised allocation of sites in terms of which ATC will provide tower services for up to approximately 2,100 sites, while IHS will manage up to approximately 1,400 sites. This includes 1,000 new MTN Nigeria sites to be rolled out over the next few years and allocated between the two tower operators.

Commenting on the agreements, MTN Nigeria’s CEO, Karl Toriola, said: “We are pleased with the successful renegotiation of our tower lease agreements with IHS and ATC, which reflect a collaborative and mutually beneficial outcome aligned with the long-term interests of all parties involved. We anticipate that these amendments will unlock significant network cost efficiencies in line with our expense efficiency programme to improve our operating margins and capital position over the medium term.”