Fitch expects to rate Helios Towers Nigeria and its proposed USD 225mn 5-yr notes at B [IntelliNews - Weekly Reports]
(IntelliNews - Weekly Reports Via Acquire Media NewsEdge) Fitch said it expects to assign a long-term issuer default rating (IDR) of B with a stable outlook to telecom infrastructure group Helios Towers Nigeria (HTN) and its planned USD 225mn 5-year bond issue. HTN, Nigeria's second-largest independent tower company with 1,187 towers at end-2013, plans to issue senior unsecured notes maturing in 2019 through a fully-owned Dutch finance subsidiary, Helios Towers Finance Netherlands B.V. The notes will be guaranteed by HTN and its wholly-owned subsidiary, Tower Infrastructure Company, which owns part of the group's tower infrastructure assets.
Fitch said that HTN's expected rating is supported by the company's strong growth potential, given the fact that mobile operators are set to continue investing in voice and data capacity and deploy more base stations, while at the same time looking to free up capital to invest in their networks by divesting their tower assets. There is a wider shift in Africa towards co-location and leasing towers from independent tower operators like HTN, which could realise significant economies of scale and improve its free cash-flow generation and leverage profile by adding more tenants to its tower portfolio.
Recent media reports suggested that South Africa-based MTN plans to sell USD 1bn worth of mobile network towers in Nigeria while Indian-owned Bharti Airtel is in talks to sell about 15,000 towers worth some USD 2bn across 17 African countries. France's Orange is also said to be in talks to sell a number of towers in Sub-Saharan Africa and Egypt. HTN, along with its bigger rival IHS, as well as American Tower Corporation and Eaton Towers, have been reportedly in talks with MTN and Airtel to acquire their mobile network towers.
HTN's rating is also underpinned by the company's visible revenue stream driven by long-term lease agreements. HTN generates more than 75% of annual revenues from Nigeria's three major mobile operators - MTN, Etisalat, and Airtel - which are all backed by investment-grade rated parents. As at end-2013, the average remaining life of all tenancy agreements was 4.8 years, and HTN had total contracted revenues of USD 352mn, Fitch said.
Among potential challenges for HTN, Fitch mentioned an increased competition among independent tower companies for any potential deal, the possible entry of another independent tower operator or a potential further consolidation among operators, which may lead to lower demand for base stations and co-location requirements.
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