Zain to sell and lease back 8,100 towers in $672m IHS deal

28 March 2019 | Jason McGee-Abe

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The board of directors of Zain Saudi Arabia (Zain KSA) has signed an agreement to sell and lease back the passive physical infrastructure of its mobile tower portfolio to IHS Holding Limited (IHS) for around SAR 2.52 billion ($672m).

The deal, which was first announced in November, will see the sale of the Zain KSA’s infrastructure of 8,100 mobile telecommunication towers located in prime and strategic locations across the Kingdom. There will be a leaseback period of 15 years, with a five-year renewal option. Furthermore, it includes the building of an additional 1,500 new towers over the next six years.

“Zain KSA is transforming financially, operationally, and strategically, and this evolution is aimed at the operator emerging as a more successful digital lifestyle services provider and delivering additional shareholder value,” said Bader Al Kharafi, Zain vice chairman and group CEO; Zain KSA vice chairman.

“Our agreement with IHS is pioneering in many respects, not least in the way it allows us to reduce debt and free up capital to invest in other areas of the business focused on customer satisfaction and service delivery. We see this milestone agreement as extremely beneficial to all stakeholders, and we are pleased to have been among the first in the region to embrace it.”

This isn’t the first time the two companies have agreed a sell and leaseback deal. In October 2017, Zain agreed to sell and lease back the passive physical infrastructure of its mobile tower portfolio in Kuwait for $165 million to IHS Holding. This was the first sale and leaseback deal for mobile telecommunication sites in the region by a licensed mobile operator.

Under the terms of the new agreement, Zain KSA is selling only its passive, physical infrastructure to IHS and will retain its intelligent software, technology and intellectual property with respect to managing its network. IHS is the largest independent tower operator in Europe, Middle East and Africa by tower count and the third largest independent multinational tower company globally.

Commenting on the deal, Sam Darwish, executive vice chairman and Group chief executive officer of IHS, said: “This agreement is another important step in our strategy to apply the expertise and capabilities that we have developed over the past 18 years to additional global markets. We are very excited by the growth prospects for wireless data and infrastructure in the Middle East and today’s news is a further example of our strong commitment to the region. We look forward to strengthening the partnership with Zain to provide customers with our high-quality services and innovative solutions.”

IHS said that it is committed to working with the other leading mobile network operators and authorities to further accelerate the development of the Kingdom’s information technology infrastructure, while expanding coverage and capacity to continue to improve network quality.

It should be noted that the original transaction valuation of SAR 2.43 billion has been revised to SAR 2.52 billion ($672 million). Sales proceeds from the Saudi Arabian deal will be used to reduce Murabaha financing, thus reducing funding burdens, and allowing the Zain KSA team to “invest and focus on the delivery of more data monetisation initiatives and customer enhancing services to offer them the best data experience in the Kingdom”.

Eng. Sultan bin AbdulAziz Al-Deghaither, CEO of Zain Saudi Arabia, added: “The deal unlocks capital and resources, allowing us to focus on our core operations and to further invest in and deliver the latest ICT technologies to meet the ever-increasing demand for reliable broadband access and data consumption. It also provides us additional impetus to focus on the delivery of more customer enhancing services in order to offer them the best data experience in the Kingdom.”

The final agreement between Zain KSA and IHS Holdings is subject to the approval of the Kingdom’s Communications and Information Technology Commission (CITIC) and financing authorities. The companies stated that any related developments will be announced immediately.

Earlier this year, Zain was awarded a spectrum licence by CITIC for the 2,600MHz band, which it will use to expand its 4G+ services adding to its existing 800, 900, 1,800, 2,100 and 2,600MHz bands.