IHS Towers and Wendel Group Reach Settlement, Implications for MTN’s Stake in Governance

In a development stirring the telecommunications sector, Nigeria’s IHS Towers, a leading cell phone tower company in Africa, has announced a significant settlement with its major shareholder, the French investment group Wendel. This agreement, disclosed last Tuesday, marks a critical juncture in IHS’s efforts to improve shareholder relations and corporate governance, with potential implications for another major shareholder, MTN Group.

The core of the settlement with Wendel addresses long-standing governance concerns that have seen IHS at crossroads with its investors. Earlier in 2023, Wendel and MTN raised objections regarding governance issues, arresting the attention of the business community and raising questions about the company's direction. The situation escalated when Wendel pursued legal action in the Cayman Islands, seeking to catalyze a vote on these essential governance proposals, after their exclusion from the agenda during the June shareholders' meeting.

In a strategic response to such pressures, IHS Towers has now reached a conciliatory accord with Wendel, concerning the litigation and mooted revisions to the company’s articles of association. Significant from this settlement is IHS’s intention to amend its governance structure, as revealed in a statement underscoring the company's dedication to rigorous corporate governance and shareholder collaboration. This change is not merely procedural but reflective of strategic corporate culture shifts, potentially impacting shareholder dynamics, particularly concerning MTN's role.

MTN, a major player in the telecommunications domain with about a 45% ownership stake in IHS Towers alongside Wendel, has indicated its desire to have increased involvement in IHS’s operational matters. Since 2014, MTN’s voting rights in IHS have been limited to preserve the tower company’s independence, given that MTN stands as their largest customer. MTN's assertiveness has been met with resistance, and the proposed amendments are set to be confirmed at IHS’s 2024 Annual General Meeting (AGM), which may further restrict MTN's influence within the company.

It is not just within the walls of corporate governance that IHS and MTN’s complex relationship plays out but also in operational collaborations. Notably, there is a suspended decision in Nigeria concerning the relocation of 2,500 towers from IHS to the American Tower Company (ATC), a move initiated by MTN Nigeria but contested by IHS. With the majority of IHS's 16,000 towers in Nigeria being leased to MTN, this operational facet is pivotal to both entities.

The settlement and subsequent governance proposals suggest that IHS Towers is aligning its operations with the practices of mature US-listed companies, as articulated by CEO Sam Darwish in the wake of the public listing. However, the impact on the company's valuation is non-negligible, with a staggering loss in value since its New York Stock Exchange debut in 2021.

At the heart of the unfolding drama is the proposal to enable shareholders with at least a 10% stake to nominate board members, contrasting the current 30% threshold. This modification could alter the company's balance of power, potentially opening the door for MTN or Wendel to assert greater influence over board appointments. The changes, while crafted to address equity and egalitarian governance, also bring forth the strategic undercurrents that might signal a possible hostile takeover bid by MTN.

As the ramifications of the settlement and proposed changes reverberate through the corporate landscape, the stakeholders of IHS Towers, MTN, and the broader telecommunication industry keenly observe the imminent 2024 AGM, which marks a significant juncture in determining the company's future governance and strategic direction.