Ooredoo and Zain to team up on towers

Ooredoo, Zain and passive infrastructure specialist TASC Towers are in talks to create what they claim would be the largest mobile towers company in the Middle East and North Africa.

The companies have agreed to carry out exclusive negotiations with a view to bringing together their tower assets in Qatar, Kuwait, Algeria, Tunisia, Iraq and Jordan into a jointly owned independent towers company. They aim to hammer out a definitive agreement by the end of this quarter.

The resulting entity, should the various parties successfully agree terms and jump through the required regulatory hoops, would have a portfolio of around 30,000 towers across the half dozen markets.

By way of comparison, current market leader TAWAL has just over half that number in its home market of Saudi Arabia, but recently bought into Pakistan and, as an aside, is currently negotiating its entry into Europe. The merged Ooredoo-Zain-TASC business would be significantly bigger. We’re not talking about the scale of an American Tower or a Cellnex, but it’s not miles behind IHS Towers, which had just over 39,000 towers at last count, albeit mainly in markets outside the MENA.

Ooredoo, Zain and TASC are playing their cards close to their collective chest in terms of valuation of the new entity, at least at this stage. All we currently know is that they are working towards a cash and stock deal.

And that rationale for the deal is the same as we have seen in similar transactions the world over.

“This transaction will create a potential shareholder value uplift for both Ooredoo Group and Zain Group through a more efficient capital structure. Both operators are committed to executing on their respective growth strategies to unlock significant capital and maximize value for shareholders while at the same time reducing the carbon footprint within the MENA region,” the telcos said, in a statement.

Essentially, they’re looking to monetise some potentially valuable assets – just as their peers have already done elsewhere – and they’re wrapping the whole thing in with their various green initiatives too.

It’s an interesting time for towers. Doubtless, there remains a huge growth opportunity in the space and the predictable, long-term nature of the returns are still attractive to investors. But the cost of owning, operating and building towers is going up too, as companies wrestle with a volatile economy and increasing cost of capital. Cellnex famously called a halt to its aggressive expansion strategy last year for much the same reasons.

That said, this proposed deal looks set to be more about building scale by combining towers operations, which adds a different element to proceedings. And without a value on the deal, it’s difficult to take the temperature of the market at this juncture anyway.

Nonetheless, despite the dearth of information, the proposed transaction seems to make a lot of sense.

Ooredoo and Zain are both working hard on their 5G rollouts in various markets – a fortnight ago Nokia demonstrated Qatar’s first 5G standalone data call with Ooredoo – and the associated capital intensity that comes with a new generation of mobile technology. It’s not a bad time to free up capital from towers.

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