North Africa: The next big towerco market?

Posted in Infrastructure Northern Africa Blog post

MobiNil’s sale to Eaton Towers of around 2,000 of its Egyptian towers has led commentators to predict a wave of new tower deals in North Africa over the next year.

There has been an active towerco market in sub-Saharan Africa since Helios Towers Africa’s purchase of 750 towers from Millicom Ghana in 2010, but the Eaton/MobiNil deal is the first of its kind in North Africa.  Why is it that North Africa has arrived so late to the party?  The lack of passive infrastructure transactions in the region may be in part due to the effects of the Arab spring on the political landscape, as well as a focus by operators until now on other factors such as network rollout and regulatory issues.

International operators (such as Vodafone, Orange, Etisalat, Ooredoo and Zain) need to free up cash for the development of their networks and to finance potential 4G roll-out. There is also a continued need for passive infrastructure to service a growing demand for connectivity in the region. Against this backdrop, the towerco model offers operators the ability to reduce future capex and opex associated with the maintenance of existing towers and the construction of new towers.  

Some of the key factors in determining towerco activity in the region (as has been the case in the sub-Saharan African market) will be:

Political stability 

The political turmoil during the Arab Spring reduced the appetite for investment in the region as a result of concerns over possible actions by religious fundamentalists and the potential for nationalisation.  Recent improved stability in the region has prompted optimism for the viability of tower deals.

Ownership restrictions 

Limitations on foreign investment will undoubtedly play a part in determining the prevalence of towerco activity in the region.  Whilst there are rumours of around 6,000 Djezzy towers coming to the market in Algeria, Algeria’s legal regime currently restricts foreign direct investment to 49 per cent meaning interested towercos and international investors can only acquire a minority stake in any endeavour and will have to team up with local partners to do so.  In a market where there is no pre-existing independent tower industry and therefore limited local expertise, this may put off potential investors.

Regulatory regime 

As in other nascent tower markets across Africa, the telecoms regulatory and licensing regimes do not necessarily contemplate the towerco business model.  Whilst an established framework for passive infrastructure licensing exists in Egypt and infrastructure sharing is encouraged by the regulator in Morocco and Libya, in Algeria and Tunisia no regulation on infrastructure sharing exists.  As such, dialogue with the regulator will be key in any tower deals in the region to ensure the correct licences are obtained. 

Overall, the region remains in flux, with uncertainty in relation to the political situation and regulatory regimes in certain markets, but North Africa appears to be attracting interest as one of the last unexploited passive infrastructure markets, both from towercos looking to expand and operators looking to monetise their tower assets.


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