Airtel Africa Plc has recently finalized a deal to extend its telecommunication tower lease agreements with the American Tower Corporation (ATC) across its subsidiaries in Uganda, Kenya, Nigeria, and Niger for an additional 12 years. This extension comes amidst an ongoing investigation by the Comesa competition watchdog regarding alleged anticompetitive behavior. However, Airtel officials have clarified that the new agreements are separate from the ongoing probe.
In its latest unaudited financial statements for the six months ending September 30, 2024, Airtel Africa revealed that it has renewed its tower lease agreements with ATC for a total of 7,100 sites in Nigeria, Uganda, Kenya, and Niger. These agreements were set to expire within the next 12 to 24 months.
The renewal of these agreements is aimed at ensuring continued benefits from contract structures, including provisions linked to foreign currency. Additionally, there is a focus on renewable energy solutions across a substantial number of sites, particularly in Nigeria. This move is expected to reduce operating costs by minimizing reliance on diesel and advancing Airtel Africa’s sustainability agenda by lowering greenhouse gas emissions.
The extension of these agreements is anticipated to enhance network reliability, reduce the risk of network failures, and facilitate the effective rollout of the 5G network. Moreover, the focus on renewable energy solutions is set to further decrease operating expenses for the company.
Despite the ongoing investigation by the Comesa Competition Commission, Airtel Africa remains cooperative and emphasizes that the tower lease extension with ATC is a result of commercial negotiations surrounding existing agreements set to expire. The Commission continues to engage with stakeholders in Kenya and Uganda to understand the market dynamics and the implementation of the agreements in question.
In February of this year, the competition watchdog initiated investigations into alleged anticompetitive conduct by Airtel Africa and ATC following a strategic partnership between the two companies. The partnership aimed to develop new telecommunication sites for Airtel based on green site specifications to reduce carbon footprint. The investigation was triggered by complaints alleging that the deal contained anti-competitive clauses.
Airtel Africa, which operates in 14 African countries, expects the extension of lease agreements to increase lease liabilities by approximately $1.2 billion, impacting the company’s leverage ratio. Despite potential financial implications, the company reaffirms its commitment to enhancing network capacity and reliability to deliver a superior network experience to customers.
The transaction is projected to affect the group’s profit numbers by an estimated $120 million to $130 million in the first year, including increased finance costs and a rise in the group’s leverage ratio. The original tower lease agreements with ATC were initially established as a sale and leaseback arrangement in 2015/2016 for a duration of 10 years, with expiry dates approaching in the next 12 to 24 months. ATC specializes in developing and leasing telecommunication towers to mobile network operators.
As Airtel Africa navigates through the challenges posed by the ongoing investigation and the extension of tower lease agreements, the company remains focused on enhancing its network infrastructure, reducing operating costs, and driving sustainability initiatives across its footprint in Africa.
