Blackwells Capital, a shareholder in MTN’s affiliate IHS Towers, is calling for leadership changes at the tower operator, including a reconstitution of the company’s board and the replacement of CEO and chairman Sam Darwish.
This, as the tower company continues to face pressure from its shareholders, who accuse it of poor governance, which has resulted in the firm’s share price tanking since it issued an initial public offering on the New York Stock Exchange two years ago.
According to Blackwells, which owns 12% of IHS, it has taken steps to initiate legal action to ensure leadership changes at IHS.
IHS declined to comment on the latest development, but the company previously told ITWeb that it wants to maintain its independence from shareholders.
Earlier this year, MTN accused IHS of wilfully breaching the shareholders’ agreement and articles over voting powers.
This, after reports emerged that the IHS annual meeting devolved into a tense standoff over investor power, after the tower operator dismissed demands from two of its largest stakeholders.
Wendel and MTN, which together own about 45% of the company, argued that all shareholders with at least a 10% stake should have the power to nominate board members. However, the IHS board dismissed the proposals.
MTN, through its subsidiary Mobile Telephone Networks (Netherlands), holds approximately 85.2 million (26%) of IHS shares.
Alleged governance failings
Founded by Darwish, IHS Towers is one of the largest telecommunications infrastructure providers in Africa, Latin America and the Middle East by tower count, and the fourth-largest independent multinational tower company globally.
In June last year, IHS Towers completed the acquisition of over 5 000 MTN towers in SA, in a deal that saw the New York Stock Exchange-listed tower company fork out R6.4 billion.
IHS Towers now owns 70% of MTN SA’s towers business, with the remaining 30% owned by a B-BBEE consortium.
In a statement yesterday, Jason Aintabi, founder and chief investment officer of Blackwells, says: “Since IHS’s initial public offering nearly two years ago, we have observed large-scale governance, operational and strategic failings, which continue to impact the value of our investment.
“In past communications, we have called for CEO and chairman Sam Darwish to step down, while voicing our serious concerns with an inept board kowtowing to his whims. Even the most basic suggestions have been met with resistance, despite the company’s share price dropping nearly 82% to date and a growing wave of unaffiliated shareholders voicing their concerns with the company’s failings.
“Just last week, MTN Group announced it is transferring approximately 2 500 Nigerian tower contracts from IHS to American Tower Corporation (ATC) – meaning the state of affairs has grown so dire that IHS’s largest investor would rather send business to a direct competitor than support the company.”
In a statement last week, MTN notified its shareholders that the lease of approximately 2 500 network sites, for which IHS Nigeria currently provides tower services, is due to expire in 2024 and 2025.
In line with MTN Nigeria’s procurement policy, which seeks to ensure a transparent and competitive bidding process, the company issued a tender for these tower contracts.
“Following a review of the bids received for tower services for the affected sites, ATC Nigeria was selected as the preferred tower company for those sites based on its superior bid submission,” said the telco.
“Additionally, this will further diversify our site portfolio and align with our proactive initiatives to renegotiate tower agreements, focusing on ensuring terms that will help cushion the business from the volatility in our trading environment.”
ATC will take over the provision of tower services for the affected sites from 2025.
Quick action needed
“This unwelcome event comes on the heels of IHS reporting a nearly $1.25 billion loss in the second quarter, much of it the apparent result of foreign currency losses, despite assuring investors its exposures were mitigated with effective hedging strategies,” Aintabi continues.
“Further, leadership incurred these losses in Nigeria – the same country where IHS is now poised to lose its tower leases – and did nothing to offer shareholders a meaningful explanation for such abysmal financial results.”
He continues: “What is clear to Blackwells is that the status quo at IHS cannot continue – as the company’s share price decline of more than 30% in the past two days alone demonstrates. This board and Mr Darwish must no longer be allowed to hide behind Cayman law to avoid accountability and proper disclosures.
“We believe the board must be reconstituted immediately with shareholder-designated directors and that the process to appoint a new CEO must begin in the near-term.”