IHS Towers faces more demands from main shareholders

Blackwells Capital, one of the largest shareholders of IHS Holding, has asked the telecom tower company to appoint new directors to the Board to improve its declining stock price.
IHS TowersBlackwells believes that the first step toward fixing disclosure issues, governance failings and value-destructive strategic lapses is reconstituting the Board. IHS shares have fallen 60 percent since the IPO in October 2021 in large part due to IHS’ refusal to embrace transparency with investors and governance standards.

“We note the recent comments made by certain of our shareholders and we continue engaging in shareholder dialogue,” IHS Towers said in a statement.

IHS Towers has nearly 40,000 telecom towers across its 11 markets including Brazil, Cameroon, Colombia, Cote d’Ivoire, Egypt, Kuwait, Nigeria, Peru, Rwanda, South Africa and Zambia.

Blackwells believes IHS should stop hiding behind Cayman law and reincorporate in more shareholder-friendly jurisdictions of Delaware or Maryland, calling on IHS to address its concerns via a special meeting.

IHS should disclose any proposals submitted by MTN Group., Wendel or other shareholders in connection with 2023 Annual Meeting. The company has refused to consider proposals reportedly submitted by MTN and Wendel, which collectively own 45 percent+ of IHS. These proposals include that shareholders holding at least 10 percent could seek representation on the company’s Board.

Blackwells said it will take all necessary steps to overhaul the current Board in the event the status quo persists.

In August 2022, IHS released its Second Quarter 2022 earnings report, which sent the IHS stock price down by more than 14 percent in the two trading days following the release.

At that time, Blackwells wrote a letter to the Board expressing concerns about significant operational, management, and general governance issues that appeared to be plaguing the company, and offered assistance with trying to remedy some of those issues.

Though revenue increased overall in 2022, the company’s reported loss for the year increased 18-fold, from $26.1 million in 2021 to $470.4 million in 2022 — a $1.39 loss per share for shareholders for 2022. While IHS appears to be generating positive cash flow from operations, the news is far from positive; the company continues to be so highly capital-intensive that it required hundreds of millions of dollars last year alone to finance new investments.

IHS used more than $1.5 billion in cash last year for investing activities, but the line items on the company’s published Statement of Cash Flows for such investing activities are not explained in any meaningful way to permit shareholders to understand these cash uses.

Moreover, the capital needs are being met almost exclusively through new borrowings—borrowings that are, in the current environment, a tremendous overhang. This is in part because the company’s stock price renders meaningful, non-dilutive capital infusion through the sale of new equity essentially impossible.

Aggregate debt level of IHS has now increased to nearly $3.5 billion, more than 60 percent or $1.3 billion greater than total debt at the time of the IPO — despite repeated company assertions in its public filings that it had sufficient liquidity for future periods.

The colocation rate of the company’s tower portfolio has declined each fiscal year from 2020 to 2022. Even when accounting for tower acquisitions from other mobile operators that typically have a low colocation rate, the colocation rate has barely changed in the reporting periods since the company’s latest acquisition of MTN’s South Africa towers in Q2 2022.

After the disastrous Q2 2022 earnings release, the stock price continued to fall until hitting a low closing price of $5.09 in October 2022 — an astonishing 75 percent loss in value from the stock’s IPO opening price of $21.

Blackwells has learned that two of the company’s largest shareholders, MTN Group  and Wendel, have put forward proposals that would enable shareholders with at least a 10 percent stake in the company to seek Board representation.