UPDATE 1-Etisalat Nigeria considers sale of transmitter towers -sources

Tue Oct 29, 2013 9:56am EDT

* Sale of transmitter towers could raise around $400 mln -sources

* Etisalat Nigeria is the country's No.4 operator

* Tower sharing increasingly popular in Africa to cut costs

By Matt Smith and Dinesh Nair

DUBAI, Oct 29 (Reuters) - Etisalat Nigeria, a unit of the Gulf's top telecom operator Etisalat, is looking to sell its transmitter towers in a deal that could raise about $400 million, banking and industry sources familiar with the matter said.

Building and maintaining mobile towers in Africa is typically more expensive than in other regions, because of security costs and electricity shortages that often require towers to be powered by generators, while new roads may need to be built to reach rural areas.

This has increasingly prompted operators to seek to sell or lease towers to specialist firms such as Eaton Towers, Helios Towers Africa, American Tower Corp and IHS.

Etisalat Nigeria, 40 percent owned by Etisalat and 30 percent by Abu Dhabi state investment fund Mubadala, has approached banks with a "request for proposal" (RFP) for advisory roles on the sale, the two sources said on Tuesday.

The sources spoke on condition of anonymity and did not know whether an advisor had yet been appointed.

Etisalat Nigeria was not immediately available for comment.

"Operating towers can be a taxing exercise for telecom operators and we have seen several players looking to offload the business to dedicated players," the banking source said.

"The success rates on these have not been too impressive but that's because these deals take a lot of time to execute."

Etisalat is estimated to own about 2,500 towers in Nigeria. Towers are often valued at around $150,000 each, making 2,500 potentially worth up to about $400 million.

ATTRACTIVE MARKET

Nigeria is an attractive market for tower firms as it has 169 million people and a relatively low mobile penetration of 68 percent. This indicates operators will need to extend their networks to reach the one-third of the population that does not not yet own a phone.

Etisalat Nigeria's network covers 78 percent of the population, according to Etisalat's 2012 annual report.

"All tower companies in Nigeria would be interested, but it requires careful analysis of how attractive those towers are because just owning a tower is not the end game - you have to figure out if that tower would be attractive to another operator and enable the tower company to lease out more space on it," said the industry source.

Etisalat Nigeria had 15.5 million subscribers in July, according to data from Nigeria's telecom regulator, making it the country's number four mobile operator with 14 percent market share.

South Africa's MTN has 47 percent, Globacom 20 percent and Airtel - a subsidiary of India's Bharti Airtel - 19 percent.

"You would need to look at the geographic location of each tower in relation to other operators' network planning, given that Etisalat has two very big competitors in Airtel and MTN who also have their own networks and towers in potentially similar locations," the industry source added.

Etisalat must decide whether to sell and lease back the towers or outsource their management for a fixed period, retaining ownership.

That will depend on Etisalat's need for cash because outsourcing tower management is largely a means to boost margins and reduce capital expenditure.

"The Nigeria tower business is a sizeable one and you could see a wide array of interest ranging from tower companies to private equity players who have the expertise in doing this," the banking source source.

"The business being in Africa means firms looking to beef up their emerging markets presence will be more interested."

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