Business Maverick


MTN’s battle with the operator of its cellphone towers in SA intensifies

MTN’s battle with the operator of its cellphone towers in SA intensifies
(Photo: Dean Hutton / Bloomberg via Getty Images)

MTN, Africa’s biggest mobile operator, has taken the extraordinary step of publicly accusing IHS Towers of governance problems. To fix the problems, MTN has called for an emergency shareholders’ meeting, which IHS appears to have rebuffed.

A dust-up is brewing between MTN and the company that operates its cellphone towers in SA, which has the potential to sour their recently solidified investment relationship.

The dust-up came to a head on Tuesday, 20 June, when MTN publicly accused IHS Towers of “wilfully” blocking its ambition to have a say in how the latter is run.

The relationship between MTN and IHS, a UK-headquartered tower operator, began in 2014 but matured in 2022 when the latter bought the former’s 5,701 towers for R6.4-billion. The towers are crucial infrastructure that provides cellphone reception/connectivity, and radio signals.

IHS now owns 70% of MTN SA’s tower business, with the remaining 30% owned by a B-BBEE consortium. In exchange for buying its towers, MTN secured shares in IHS as it holds about 85.2 million of IHS’s shares – through its subsidiary Mobile Telephone Networks (Netherlands) – equating to a 26% shareholding in the company.

The genesis of the dispute is that MTN wants to have a greater say in how IHS is run because it is a shareholder in the company. MTN also wants the ability to nominate individuals of its choice on the board of IHS. MTN believes that all shareholders with at least a 10% stake should have the power to nominate board members. Wendel, a French investment company, which in a coalition with MTN owns about 45% of IHS, has backed MTN in its demands.

MTN registered its demands at a recent IHS annual general meeting, which, according to Bloomberg, devolved into a tense stand-off between both companies. This is because IHS shot down all of MTN’s demands. 

MTN becomes vocal

MTN is now vexed and has issued a public statement, calling for an emergency shareholder meeting to air its concerns. It is an extraordinary move by MTN, which normally prefers a quiet approach to resolving disputes, especially with a company it has an investment relationship with, such as IHS.

IHS looks set to also shoot down MTN’s request for an emergency meeting. In a statement to Daily Maverick on Wednesday, 21 June, IHS said: “MTN does not have the right to call an extraordinary general meeting”, according to a shareholder agreement between both companies.

IHS maintains that MTN’s demands are not in IHS’s interests and those of its other shareholders as it would compromise the company’s independence, especially when it comes to decision-making. Although MTN’s shareholding in IHS is 26%, its voting rights on decisions are capped at 20%.

“MTN’s voting rights have been capped at 20% since 2014 per [the shareholder] agreement with MTN to preserve IHS Towers’ independence and account for the fact that MTN is IHS Towers’ largest customer.

“MTN does not have the right to call an extraordinary general meeting under our Articles or shareholder agreement. IHS Towers remains focused on increasing shareholder value and will continue to engage with MTN as we do with all our shareholders,” said IHS in its statement.

Arguably, MTN will not be happy about IHS’s position as it sees the situation regarding its voting rights differently. Currently, MTN’s voting rights do not match its ownership in the company, and it wants to equalise the two.

“MTN strongly believes that IHS has wilfully breached the shareholders’ agreement and articles by failing to notify its shareholders of the proposal [to have more of a say in how IHS is run] and denying its shareholders the opportunity to vote on it at the AGM [annual general meeting]. 

“The proposal was intended to protect important shareholder rights and to better align IHS’s corporate governance with other publicly traded companies. Under the shareholders’ agreement and its articles, IHS was required to include the proposal on the agenda for the AGM, notify all other shareholders of the proposal, and allow shareholders to vote on the proposal at the AGM,” said MTN.

The history between MTN and IHS 

MTN’s unhappiness with IHS has surprised the market because less than three weeks ago, the mobile operator signalled it was happy with its investment in IHS and that it was unlikely to sell its quarter stake in the company for the next three to five years. So far, the relationship between MTN and IHS has been beneficial for both parties.

IHS provides power management and maintenance services to MTN on its towers, based at about 13,000 sites in SA. MTN has supported IHS over many years, which helped pave the way for the company to list its shares on the New York Stock Exchange in October 2021. Today, IHS is one of the largest telecommunications infrastructure providers in Africa, Latin America and the Middle East.

The underperformance of IHS shares on the New York Stock Exchange has also prompted MTN to want to have a say in how the company is run and unlock value.

Adverse market conditions have seen the value of IHS shares substantially lose their value, debuting at $16.69 a share to now trading at $8.59.

If IHS rejects its call for an emergency shareholder meeting (which it seems to have done), MTN said it would evaluate all its options to fully enforce its rights as a shareholder. A legal battle might ensue. DM


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