Atlas Tower said to be in talks with potential black partners

South African telecommunications tower company Atlas Tower is in talks to bring in partners from the country’s black majority to help it expand at home and enter new markets on the continent, according to people familiar with the matter.

CEO Nathan Foster has relied mostly on wealthy individual investors for funds since he founded the business in 2007 and is looking to do additional private fundraising and equity deals. The company has an enterprise value of around R3-billion based on a multiple of tower cash flow, said the people, who asked not to be named as the matter is private.

Bringing in new partners under South Africa’s black economic empowerment rules could put Atlas Tower in a stronger position as the industry prepares for a wave of new investment. The government plans to auction frequencies for 5G mobile services and wants to develop an open-access mobile network to reach far-flung rural areas.

Demand for mobile Internet services is growing fast across Africa, where 60% of the population is under 25 years old, fuelling rapid growth for tower companies such as IHS Towers, Helios Towers and Eaton Towers.

Helios has indicated that it’s seeking a local partner to enter the South African market next year. There are around 30 000 telecoms towers in South Africa, of which only a small proportion are held by independent tower companies. Atlas says it owns and operates more than 600 towers worldwide.

“We are starting investment in Kenya and Botswana and the first towers will be operational before the end of the year,” said Foster by e-mail. “We are growing at 130%/year in terms of tower growth rate.” He declined to comment on the talks with potential partners.

South Africa’s empowerment policies are designed to rectify the economic exclusion of black people in the economy during the country’s era of segregation and provide additional capital to fund private business. Critics say the rules have further enriched a black elite while failing to improve the lives of most South Africans.  — (c) 2018 Bloomberg LP