IHS Towers, the world’s fifth-largest multinational tower company, reported a significant decline in revenue for 2024, falling to $1.7 billion from $2.1 billion in 2023. The company’s financial performance remains heavily dependent on its operations in Nigeria, which contributed 58.3% of its total revenue. However, economic challenges, rising operating costs, and reliance on a few key customers have raised concerns about its future growth and profitability.
Revenue Concentration Risks
MTN Nigeria and Airtel Nigeria accounted for 57% of IHS Towers’ revenue in 2024, underscoring its reliance on a narrow customer base. In total, 98.5% of the company’s earnings were tied to just three mobile network operators: MTN Nigeria, Airtel Africa, and MTN South Africa. This concentration poses significant risks, as any downturn affecting these customers—such as economic instability, currency devaluation, or regulatory changes—could severely impact IHS Towers’ financial performance.
Nigeria’s economic challenges, particularly the sharp devaluation of the naira since 2023, have exacerbated inflation and financial uncertainty. With 58.3% of its revenue tied to Nigeria, further economic deterioration could hinder IHS Towers’ growth and profitability. The company has acknowledged these risks, particularly the potential impact on its key customers’ ability to meet lease obligations and sustain demand for tower infrastructure.
Rising Operating Costs
IHS Towers is grappling with increasing operating costs, driven primarily by rising fuel expenses, site maintenance, and security. Power generation remains its largest expense, accounting for 39.2% of the company’s cost of sales in 2024, up from 33.5% in 2023. The company spent $348 million on power generation in 2024, compared to $396 million in 2023.
To mitigate these costs, IHS Towers has invested in hybrid energy solutions, combining diesel generators with solar and battery systems. As of December 2024, 41% of its sites operated on hybrid power, 33% used grid electricity with backup generators, and 18% relied solely on generators. The remaining 8% operated on direct grid connections or alternative energy sources like solar power.
“Given the importance of diesel for the operation of our sites in many of our African markets, we may purchase diesel in large quantities, which is then stored at our facilities,” IHS Towers stated in its financial report.
Expansion Challenges
The financial burden of expanding its network remains significant. As of December 2024, the cost of building a new tower ranged between $50,000 and $100,000 in Africa, while in Latin America, it ranged from $40,000 to $80,000. These high costs pose a challenge for further expansion, especially in an economic environment where access to financing and foreign exchange remains restricted.
Despite securing long-term Master Lease Agreements (MLAs) that typically last five to ten years, IHS Towers’ revenue remains highly dependent on the financial health of its key customers. Many of these mobile network operators rely on substantial debt or external funding to sustain operations. If they struggle to secure financing, they may cut back on infrastructure investments, reducing demand for IHS Towers’ services and impacting its revenue.
Optimism Amid Challenges
Despite these challenges, CEO Sam Darwish remains optimistic about growth opportunities, particularly in Nigeria. The recent approval of a tariff increase by the Nigerian Communications Commission (NCC), now being implemented by major operators like MTN Nigeria and Airtel Nigeria, is expected to boost investments in telecom infrastructure.
“We are extremely bullish on Nigeria at the moment,” Darwish said, expressing confidence that the tariff adjustments will positively impact the industry in 2025 as telcos expand their networks to enhance service delivery.
Market Leadership and Future Outlook
IHS Towers continues to dominate the telecom infrastructure industry in Africa, managing 39,229 towers across six African and two Latin American countries as of December 2024. It is the largest independent tower operator in six of its eight markets and the only independent scale operator in four.
However, the company’s heavy reliance on Nigeria and a narrow customer base means it will need more than just towering ambitions to weather the storms ahead. Sustained growth will require diversifying its revenue streams, managing operating costs effectively, and navigating the economic and regulatory challenges in its key markets.
IHS Towers’ 2024 performance highlights both its market leadership and the vulnerabilities stemming from its reliance on Nigeria and a few key customers. While the company remains optimistic about growth opportunities, particularly in Nigeria, it must address rising operating costs, economic instability, and customer concentration risks to ensure long-term sustainability and profitability. As the telecom infrastructure landscape evolves, IHS Towers will need to adapt strategically to maintain its position as a global leader in the industry.