MTN Nigeria renegotiates tower lease agreements with IHS and ATC, cuts dollar component

MTN Nigeria Communications Plc on Wednesday said it has renegotiated the binding commercial terms of the existing infrastructure sharing and master lease agreements with IHS and ATC Nigeria.

Specifically, the company said it has revised the terms of its contract with IHS to 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.

According to a notice to the NGX and signed by the Company’s Secretary, Uto Ukpanah, the renegotiated terms also remove technology-based pricing, allowing payments for new upgrades based on tower space and power.

In addition, MTN said it has reached a mutual agreement with ATC Nigeria Wireless Infrastructure Solutions Limited and IHS regarding the approximately 2,500 sites that were awarded to ATC from the IHS portfolio.

MTN said the terms of the amendments to its contract with IHS 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.

It added that 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,” it said.

Between IHS and ATC, MTN said 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.

According to the company, this agreement followed trilateral discussions that commenced in Q2 2024. 

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.” 

MTN noted that the renegotiation of the deals was one of the initiatives outlined at the company’s recent EGM to support the recovery of our capital position.

MTN Nigeria experienced significant financial strain due to the continued depreciation of the naira, reporting a net foreign exchange loss of $413.143 million in Q1 2024, contributing to a record-high forex loss of $89.108 billion since 2023.

In response to ongoing US dollar volatility, MTN Nigeria is reducing its dollar-denominated liabilities and reassessing costly tower lease contracts, aiming to align these expenses more closely with its naira earnings.

To actualise this, the company earlier this year said it was considering strategic options to manage its tower lease contracts. It added at that time that it was engaging in constructive discussions with key Towerco service providers regarding changes to the existing tower lease contracts.

Source:techfocus24.com