Zain Saudi to sell tower infrastructure to IHS Holding for $647.7 mln

Telecom operator Zain Saudi Arabia has accepted an offer from IHS Holding, a mobile tower operator, for the sale and leaseback of its tower infrastructure in a deal valued at 2.43 billion riyals ($647.7 million), it said on Wednesday.

Zain will sell 8,100 towers and related passive infrastructure and lease them back for 15 years, with an option to renew for five years, it said, adding that the deal also included the building of an additional 1,500 towers over the next six years.

Selling towers or sale-and-lease-back deals allow operators to reduce capital expenditure and duplication of resources as well as freeing up cash to focus on marketing and promotions, which are increasingly decisive in wooing customers as network quality becomes uniform.

Such deals often happen in Africa, Europe and other regions, but are less common in the Middle East.

Zain Saudi said the proceeds from the deal will be used to reduce its Murabaha facility, an Islamic financing structure, by 2.43 billion riyals, resulting in savings to the debt servicing.

It will also allow Zain to focus on its core business and grow infrastructure with reduced investment, it added.

The company, 37 percent-owned by Kuwait’s Zain Group , has been exploring the sale of its towers since as early as January 2015.

IHS Holding operates in Ivory Coast, Cameroon, Rwanda, Nigeria and Zambia, according to its website.

Under the terms of the deal, Zain is selling only its passive, physical infrastructure and will retain its software, technology and intellectual property with regard to managing its network, it said.

The deal is subject to a final binding agreement between the parties, as well as regulatory approval and approval from lenders, Zain Saudi said.