IHS again cuts LatAm tower construction outlook

IHS Towers has again revised down its full-year telecom towers construction outlook, including in Latin America, as demand for new sites cools down. 

The London-headquartered firm, which claims to be the world’s third largest in tower count, now expects to end 2022 with 300 new sites in Latin America, according to its financial results. The number is down from 400 in its previous outlook.

In Latin America, IHS operates in Brazil, Colombia and Peru, but all the new LatAm sites are due for Brazil.

The revised built-to-suit (BTS) forecast was again attributed to “timing and general market conditions,” the company said in its Q3 earnings report. BTS refers to sites developed on-demand, according to specific customer needs. 

Globally, IHS now plans to build 1,350 sites in 2022, down from 1,750 in its previous guidance. Of the total, 650 are expected to be deployed in Nigeria, its largest global market, down from 950 previously.

“The majority of that reduction is coming through rural sites in Nigeria, which have very little financial impact to us,” CFO Steve Howden told investors in an earnings call.

The company continues to see demand for leasing, colocation and contract amendments.

“As we look forward to next year, we see an overall cooling of BTS requirements versus what we originally started out with this year. But certainly that will still be a component of our growth next year. We still want to deploy capital into BTS. The return still makes sense,” said Howden.

Renato Pasquini, senior LatAm analyst and Brazil CEO of consultancy Frost & Sullivan, believes the telecom infra market will remain very active in 2023.

“We expect that players in this market continue to expand their investments, in various infrastructure assets, including to handle all the infrastructure necessary for this reality of 5G, and edge computing, with tower players advancing on datacenters and fiber,” Pasquini told BNamericas.

Despite IHS’s outlook revision, Latin America remains the fastest-growing market for the company. 

IHS posted global Q3 revenues of US$521mn, up 30.2% year-over-year, with Latin America contributing US$42.1mn, up 182% compared to the same quarter 2021. 

The group has invested over US$1.3bn in its LatAm operations in the last two years.

Despite the revenue growth, the company posted a Q3 loss of US$52.5mn, up from a loss of US$30.4mn in 3Q21. In the year to September, the loss was US$215mn compared to a profit of US$46.1mn in the same period 2021.

IHS said that was due to increases in unrealized FX losses and in cost of sales, including higher diesel costs, and administrative expenses.

ACQUISITIONS AND PORTFOLIO

In Latin America, most of the revenue increase was related to acquisitions, rather than to organic build-outs, primarily the purchase of Brazil’s GTS SP5 that was closed earlier this year. 

IHS sees the market as being cheaper for buyers.

“Regarding M&A, we cannot comment on processes or client transactions, but we have seen valuations kind of like 'soften' recently," CEO Sam Darwish said when asked about M&A strategy.

“We continue to pursue opportunities, but we are highly selective at the moment. We'll see how the future evolves.”

During the call, Darwish said the company was happy with its current geographical footprint, but that it evaluated new opportunities both in current and new markets citing a “robust number of M&A processes in the market for our goal to further diversify our revenue stream.”

IHS also attributed the LatAm Q3 performance to revenue coming from its fiber JV with TIM Brasil, known as I-Systems. 

As BNamericas reported, IHS Towers is actively considering replicating the neutral fiber network model it developed in Brazil with TIM in Colombia and Peru. 

TOWERS

Overall, Latin America accounted for 7,195 of IHS’s 39,397 active sites, or 18.2% of the total portfolio, as of the end of September.

Brazil, IHS’s second largest market after Nigeria, led with 6,915 towers, up from 4,525 the year before. 

Colombia and Peru had 228 and 52, respectively, flat and up by one tower.

According to IHS, LatAm tenants (customers per tower) grew by 3,825 in the year, including 276 from new sites, and 2,998 from the GTS SP5 acquisition.

The group claims to be world’s third largest independent multinational towerco, after American Tower (221,132 sites) and Cellnex (approximately 138,000), and almost neck-and-neck with SBA Communications (39,185), according to a chart provided by IHS.

As of September 30, however, SBA reported it owned or operated 36,519 sites in16 markets. American Tower, in turn, reports 223,000 active global sites.