MTN has announced a strategic overhaul of its tower lease agreements with major infrastructure providers IHS and ATC Nigeria, aiming to alleviate financial pressures exacerbated by volatile foreign exchange rates.
The telecom giant’s decision marks a significant shift in its approach to managing infrastructure costs, with implications for its long-term financial health and operational efficiency.
On Wednesday, MTN Nigeria revealed that it had successfully renegotiated the terms of its infrastructure-sharing agreements with IHS Towers and ATC Nigeria Wireless Infrastructure Solutions Limited.
This move includes a substantial reduction in the US dollar-indexed component of these leases, replacing it with a majority naira-based structure.
Uto Ukpanah, MTN Nigeria’s Company Secretary, outlined the key changes in a notice to the Nigerian Exchange Group (NGX).
According to Ukpanah, the revised contracts now incorporate a capped naira Consumer Price Index (CPI) escalator, eliminating the previous technology-based pricing.
This adjustment will also see payments for new upgrades determined by tower space and power usage rather than technology.
“The renegotiated terms aim to mitigate macroeconomic risks affecting our business while supporting margin recovery and addressing our negative equity position,” said Ukpanah.
This change is expected to provide financial relief amid the challenging forex environment.
The new agreements extend the duration of the contracts with IHS Towers to December 31, 2032, with the renegotiated terms effective from April 1, 2024.
This extension is a significant change from the original expiration dates, which ranged from December 2024 to December 2029.
Additionally, MTN Nigeria has reached a mutual agreement with ATC Nigeria and IHS regarding approximately 2,500 sites.
The revised allocation will see ATC managing around 2,100 sites, while IHS will oversee approximately 1,400 sites. This includes the rollout of 1,000 new MTN sites in the coming years.
Karl Toriola, CEO of MTN Nigeria, expressed satisfaction with the renegotiation outcomes.
“We are pleased with the successful renegotiation of our tower lease agreements with IHS and ATC. These changes reflect a collaborative approach and align with the long-term interests of all parties involved,” Toriola commented.
“We anticipate that these amendments will unlock significant network cost efficiencies and improve our operating margins and capital position over the medium term.”
MTN Nigeria’s financial challenges have been compounded by the ongoing depreciation of the naira, which has led to significant foreign exchange losses.
The company reported a net foreign exchange loss of N656.3 billion in Q1 2024, contributing to a record-high forex loss of N1.396 trillion since 2023.