![]() ![]() The population is slated to grow by 2% CAGR compared to stagnant growth in the G7. Helios Presentation of Attractiveness of Africa for Tower Operators (Helios FY 2022 presentation)Ĭompared to the Group of 7 (G7) developed countries, African countries have almost half the mobile penetration as G7. Here is competitor Helios Towers' ( OTCPK:HTWSF) argument for the attractiveness of the African market: Demographic Tailwindsĭemand for towers depends on the growth of mobile markets and the increasing wealth of a populace willing to pay for data. Since IHS has a presence mainly in Africa, I will discuss the demographic tailwinds that make Africa such an attractive place for a towerco. However in places like Africa and Latin America, even if you only have one tenant, economics are pretty good, however, a second or third tenant is gravy. Returns given number of tenants in a Tower (AMTs Introduction to the Tower Industry Presentation)īy AMT's own admission, if you can get more than one tenant in a tower, towercos have excellent business economics. Thus, building the tower is a fixed cost, but renting to additional network operators is almost 100% gross margin. A tower operator builds a tower and then rents space for mobile network operators to send phone and data signals to a large geographic area covered by the tower. In every jurisdiction, increasing IRR comes from additional telcos tenants per tower. But this graph, provided by the largest towerco in the US, clearly shows that the bottleneck in supply in the developed world, combined with cheaper construction costs, makes the US one of the worst places for a tower REIT from an IRR perspective, and yet AMT and SBA Communications Corporation ( SBAC) have compounded capital excellently - returning a CAGR between 12% and 15% since inception. Investors often argue that the US is the tower REITs best market due to zoning restrictions that make it difficult to build more towers, an effective power grid to provide energy, and the combination of many mobile operators who are willing tenants. ![]() ![]() Tower IRRs given location and number of tenants (AMTs Introduction to the Tower Industry Presentation)ĪMT illustrates internal rates of return (IRRs) in developing countries that are significantly better than US tower IRRs. ![]() In order to illustrate the economics of the industry, here is a slide from an Industry Presentation by American Tower Corporation ( AMT). Recently it has also expanded the business to Kuwait and some of Latin America. IHS is the industry leader towerco in Nigeria and concentrates much of its business in Africa. IHS is a towerco, a company that builds and manages towers for telecom firms. For these reasons, I have a bullish view of IHS. As I show below, IHS is positioned to take advantage of demographic tailwinds, operates a great business, and has a long runway to grow. One such firm, IHS Holding ( NYSE: IHS ), is the fourth largest telecom tower operator in the world with most of its operations in Africa and a reminder in South America - all fast-growing and high IRR jurisdictions. One of my favorite investment tricks is to look at companies that have compounded like gangbusters in the US or Europe and invest in copycat companies in the rest of the world. ![]()
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