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Fitch rates Helios Towers Nigeria ‘B’

By on September 12, 2014

Fitch Ratings has assigned telecom infrastructure group, Helios Towers Nigeria Limited (HTN) a long-term Issuer Default Rating (IDR) of ‘B’ with a stable outlook.

This followed the telecom company’s successful placement of $250 million of 8.375 per cent senior unsecured notes due 2019.

The notes have been assigned a final ‘B’ rating and recovery rating of ‘RR4’ upon receipt of final documentation conforming to preliminary information already received by Fitch, according to a statement from the rating agency.

HTN had issued $250 million of senior unsecured notes maturing in 2019 through a fully owned Dutch finance subsidiary, Helios Towers Finance Netherlands B.V. The notes were guaranteed by HTN and Tower Infrastructure Company Limited, a fully owned subsidiary of HTN, which owns part of the group’s tower infrastructure assets.

The notes are rated at the same level as the company’s IDR of ‘B’ as they constitute a direct, unconditional and unsecured obligation of HTN and of the other guarantor, and rank pari passu with all existing and future unsecured obligations of HTN.

The bond documentation includes cross-default and change of control provisions as well as incurrence tests limiting additional indebtedness and restricted payments. HTN is the second-largest independent tower company in Nigeria (based on the number of towers) with 1,187 towers at end-2013. The company leases space to telecoms operators at its tower sites for antennas and other wireless transmission equipment and provides full site maintenance, including power management and security services, under long-term lease agreements.

Fitch explained that its rating on the company was influenced by the rapidly increasing demand for mobile and broadband communication services in Nigeria.

It noted that given a distinct lack of fixed-line infrastructure, poor mobile coverage and regulatory pressure to improve quality of service, mobile operators are expected to continue investing in voice and data capacity and deploy more base stations to take advantage of this growth potential.
“Operators are also looking to free up capital to invest in their networks by divesting their tower assets, following a wider shift in Africa towards co-location and leasing towers from independent tower operators.

“HTN should be able to capitalise on these trends, mainly by adding more tenants to its portfolio of live and dormant towers, as it has successfully done over the past few years.

“This should help HTN realise significant economies of scale and improve its free cash-flow generation and leverage profile,” it noted.
According to the report, HTN benefits from a visible revenue stream driven by long-term lease agreements, which comprise embedded contractual escalators and, in some cases, cost pass-through mechanisms.
Following a shift in the market from CDMA to GSM operators, over 75 per cent of revenues are derived from three major tier-1 GSM players, MTN, Etisalat, and Airtel, which are all backed by investment-grade parents.

 

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