Sale of passive, tower infrastructure to IHS approved

Zain Vice Chairman and Group CEO Bader Al-Kharafi

RIYADH: Zain Group announces that the board of directors of Zain Saudi Arabia (Zain KSA) has approved an offer to sell and lease back the passive physical infrastructure of its mobile tower portfolio to IHS Holding Limited (IHS) for circa SAR 2.43 billion ($648 million). IHS is the largest independent tower operator in Europe, Middle East and Africa by tower count and the third largest independent multinational tower company globally. Zain KSA has more than 8,100 mobile telecommunication towers located in prime and strategic locations across the Kingdom.

Under the terms of the agreement, Zain KSA is selling only its passive, physical infrastructure to IHS and will retain its intelligent software, technology and intellectual property with respect to managing its network. The agreement also involves a lease back period of 15 years, with a 5-year renewal option and building of an additional 1500 towers over next 6 years.

This offer for Zain KSA' tower portfolio is a consolidation move as it comes after Zain Kuwait entered into an agreement also with IHS Holding, which was the first sale and leaseback deal of telecom towers in the Middle East region by a licensed mobile operator, and that will create the first independent tower operator of scale in the region.

The transaction is subject to a final binding agreement being entered into between the parties which will include an approval requirement from the Kingdom's Communications and Information Technology Commission (CITC), as well as approval from the lenders.

Commenting on this important development, Bader Al-Kharafi, Zain Vice-Chairman and Group CEO; and Vice-Chairman of Zain Saudi Arabia said, "The sale of Zain KSA's impressive tower network is a highly positive move, as it creates shareholder value by helping the company reduce its debt position, as the proceeds will be used to reduce the company's Murabaha facility. Both the Zain Saudi Arabia board of directors and Zain Group executive management are confident that we have chosen the right partners in IHS, a company that possesses high caliber expertise with sound operational experience in diverse markets."

Al-Kharafi continued, "We recognize and appreciate the efforts made by the Kingdom's CITC in keeping abreast with global trends in the telecommunications sector by offering licenses to provide wholesale services for Tower infrastructure, thereby reducing capital expenditure challenges on telecom operators and raising the efficiency of mobile networks. This proactiveness also allows new investors to enter the market, creating job opportunities. These efforts by the CITC that complements our deal with IHS, enhances Zain KSA's mission of playing its contributory role to achieving the Kingdom's 2020 National Transformation Program and the 2030 Economic Vision ambitions."

Al-Kharafi concluded, "Zain KSA has implemented a transformation program in the Kingdom for some time now, advancing its efforts to become a digital lifestyle provider. The deal unlocks capital and resources, allowing the operator to focus on its core operations and further invest in and deliver the latest ICT technologies to meet the ever-increasing demand for reliable broadband access and data consumption. It also provides Zain KSA additional impetus to focus on the delivery of more data monetization initiatives and customer enhancing services to offer customers the best data experience in the Kingdom."

This value creating agreement with IHS coincides with the celebrations of Zain KSA's tenth anniversary of commercial operation in the Kingdom and comes on the back of the impressive third quarter 2018 results achieved by the company, its best-ever quarterly results since its establishment. The progress achieved by Zain KSA in implementing the company's transformation strategy, saw the company recently make an early voluntary payment of SAR 600 million for its Murabaha financing agreement, portraying the company's solid cashflow generation.