Zain Saudi Arabia and IHS deal to speed up development of Kingdom’s information tech infrastructure

April 22, 2019
Sam Darwish
Sam Darwish

JEDDAH — IHS Holding Limited (IHS), one of the largest independent owners, operators and developers of shared telecommunications infrastructure in the world and leader in EMEA by tower count, said that the recent agreement signed with Mobile Telecommunications Company Saudi Arabia (Zain KSA) will help accelerate the development of the Kingdom’s information technology infrastructure.

The agreement comprised the sale and lease back of Zain KSA’s passive physical infrastructure of its mobile tower portfolio to IHS. Zain KSA has approximately 8,100 mobile telecommunication sites located in prime and strategic locations across the Kingdom.

In an interview, Sam Darwish, IHS Towers Executive Vice Chairman and Group CEO, said the deal will also expand coverage and capacity to continue improving network quality – through CAPEX deployments to the passive physical infrastructure. It will likewise support the region’s wireless industries by speeding up the delivery of best-in-class wireless solutions to mobile users throughout Saudi Arabia, which is in line with the Kingdom’s Vision 2030 strategy.

Excerpts from the interview follow:

• As an independent owner, operator and developer of shared telecommunications, what is the impact of the agreement on your industry image?

The transaction is aligned with our strategy and vision of providing best-in-class telecoms infrastructure throughout global emerging markets. Subject to certain regulatory and statutory approvals for this transaction, IHS will be the first independent tower operator of scale in the region. It’s important to note that we also announced an agreement with Zain in Kuwait in October 2017, and this latest transaction strengthens our position as the largest independent tower operator in the Middle East. Upon completion of the Zain Kuwait and Saudi Arabia transactions, IHS towers will have approximately 33,100 towers in its portfolio – cementing its position as one of the largest independent tower operators in the world.

• What are the obligations of IHS under the agreement? Are you in a position to deliver them without delay despite the economic uncertainties?

Our agreement with Zain Saudi Arabia is a sale and leaseback agreement, which means we are largely dealing with already existing infrastructure. This business model allows IHS to purchase the physical tower infrastructure, enabling our customers (mobile network operators) to free up capital and expand their network quickly and for less cost, while receiving best-in-class service. We are also confident in our ability to build an additional 1,500 new sites over the next six years as we have a strong record of achieving our operational objectives in a timely fashion. We may build more, depending on market conditions.

• Do you anticipate some challenges that might adversely affect the implementation of the agreement? If so, what are they, and how would you overcome them?

We are optimistic of the Kingdom’s prospects and are very supportive of the Kingdom’s Vision 2030 strategy – which we believe is making good progress. The Kingdom has a strong economy and the Vision 2030 program is critical in transforming the country into a more modern resilient economy which will benefit the people of the Kingdom.

• The agreement is for around SR2.52 billion ($672 million). How profitable is it on your part considering that the overall lackluster economic environment dampens the growth and investment prospects for wireless data and infrastructure?

Saudi Arabia is the largest free market economy in the Middle East and North Africa, with a 25% share of Arab GDP, according to industry reports. It has a continuously expanding domestic market, which is further boosting its youthful population that consumes significant amounts of data. For instance, Saudi Arabia has the highest annual growth rate of social media users anywhere in the world and nearly half of young Arabs (49%) in 2018 said they receive their news on Facebook daily, up from 35% the year before. We therefore believe Saudi Arabia and the Middle East’s wireless industries are poised for a sustained period of growth and this transaction will accelerate the delivery of best-in-class wireless solutions to mobile phone users throughout the Kingdom.

• Global connectivity matters in this digital age. Should the Kingdom’s Communications and Information Technology Commission approve the deal and other conditionalities complied with, what improvements will happen to the Saudi mobile telecommunication industry one year thereafter? Would it also ensure flawless customer communications? Will it provide a seamless customer experience to engage them today and into the future?

Under the agreement, IHS Towers will continue helping accelerate the development of the Kingdom’s information technology infrastructure, for 4G and 5G growth, while expanding coverage and capacity to further improve network quality throughout the country. The tower sharing model is inherently beneficial to the end user. Network deployments and operations are costly affairs and rather than each operator replicating the CAPEX and OPEX needed, the result is one tower being shared by several operators, thereby reducing the cost of building and running their networks, which can ultimately translate into better services for the end user.

“We are focusing on further developing our fiber offering and are looking into data centers,” Darwish noted. — SG

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