American Tower expands further in Africa with acquisition of 723 towers

Telkom Kenya has reached an agreement to sell the towers to American Tower to ease cash flow
Telkom Kenya has antered an agreement with American Tower for them to purchase over 700 Telkom Kenya Towers.
Telkom Kenya has antered an agreement with American Tower for them to purchase over 700 Telkom Kenya Towers.

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Telkom Kenya has announced it has reached a definitive agreement to sell up to 723 towers to American Tower, expanding the latter’s footprint to a fifth country in Africa.

“We are excited to announce the launch of operations in Kenya through our agreement to acquire TKL’s towers,” said William Hess, American Tower’s President of EMEA and Latin America. “This represents American Tower’s 17th market globally, and our fifth in Africa, and we look forward to helping expand the reach of mobile broadband throughout the country. Kenya is a very attractive market, and we have high expectations for its long-term growth potential.”

The transaction, which will be completed in the second-half of 2018, will give the telco a bit of breathing room and cash to invest in its 4G network. Kenya Telkom has been performing adequately to date, though has struggled to get anywhere near market leader Safricom. It is hoped the funds will give the telco a boost to be more competitive.

“Telkom will now focus on its core function – the provision of quality telecommunications services to our customers,” said Aldo Mareuse, CEO of Telkom Kenya. “In addition, the sale will release capital for further investment in our 4G network and a number of state of the art IT platforms, all of which will further enhance services for our customers as they demand higher quality and speed from our mobile data networks as well as a richer range of services.”

American Tower is one company which has been on the acquisition trail recently, seemingly capitalising on strong financial performance. American Tower has also acquired the tower business units of both Idea and Vodafone in India, as the pair gear up to tackle the disruption caused by Reliance Jio in the market. Praying on struggling telcos’ assets seems to be a successful strategy here, as it spent $673 million to acquire nearly 10,600 sites over the first three months of 2018.

Looking at the financial side of the business, American Tower recently reported its figures with the first quarter demonstrating a 7.8% year-on-year increase to $1.742 billion, though it has lowered forecasts for the year, citing the troublesome Indian market and other factors.

The team will also be keeping an eye on developments with Sprint and T-Mobile, with the pair accounting for 4% and 3% (respectively) of American Tower’s consolidated property revenues. While there is still three to four years left on non-cancellable lease agreements, and the team anticipate aggressive spending to catch up to the top tier, consolidation of two major customers generally doesn’t bode well for the supplier.

Whether there is any acquisition left in American Tower remains to be seen, though the team has stated it is continuing to review and act on expansion opportunities in international markets. It does not seem to be shy about living by the ‘speculate to accumulate’ mantra.

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