On 4 October, IHS Holding Limited (B2 negative), a leading independent mobile tower
operator operating in Africa, Latin America and the Middle East, announced it is pursuing an
initial public offering (IPO) on the New York Stock Exchange, which is expected to raise up
to $432 million of new capital for IHS. The planned IPO is credit positive for IHS because
it will provide access to the equity market, strengthen its balance sheet and increase its
cash balances toward $1 billion, providing the company with sizeable funds to continue to
diversify its business outside of its main market Nigeria (B2 negative). It will also be credit
positive for MTN Group Limited (MTN, Ba2 negative), which owns 29% of IHS, because it
will allow MTN to achieve its stated objective of reducing its stake in IHS over time, reducing
debt and simplifying the group’s portfolio.

While IHS’s credit metrics and business profile are better than the B2 rating implies, IHS's
credit quality is constrained by the sovereign risks of Nigeria, reflected by the B2 government
bond rating and foreign currency ceiling of B2. This is because of the high concentration
of IHS's cash flow (around 78% of 2020 EBITDA) and the elevated risks associated with
operating in Nigeria, such as the repatriation of cash flow offshore, which has been difficult
for some companies, at times.

IHS’s financial capacity to pursue sizeable acquisitions is already large, with cash balances
of $542 million, a $245 million undrawn revolving credit facility and sizeable headroom
between Moody’s adjusted gross debt/EBITDA of 2.9x as of 30 June 2021 and the downgrade trigger of 5.5x. Following the IPO, the additional equity proceeds will boost the cash balance toward $1 billion. Despite this sizable debt capacity, IHS’s financial policy will remain unchanged with the company maintaining its conservative net debt/EBITDA target of
between 3x and 4x (2.2x reported as of 30 June 2021, pro forma including acquisitions) and
not paying dividends.

The prospectus states that the IPO proceeds would be used for general corporate purposes,
including acquisitions, though at present there are none contemplated beyond the recently
signed and announced TIM Fiber acquisition in Brazil. Over the past 18 months, IHS has been
growing its operational footprint, acquiring tower businesses in Latin America and the Middle
East regions, which account for around 8% of pro forma 2020 revenue, followed by 21%
from four African operations and 71% from the Nigerian operations.

We expect IHS to continue to focus its attention on expanding its operations in the Latin
American and Middle Eastern markets, which will over time reduce its reliance on cash flow
from Nigeria, thereby lowering its credit exposure to the country. Such diversification is illustrated by IHS's announcement on 6 October 2021 to partner with the Egyptian Ministry of Communications to potentially roll outup to 5,800 build to suit towers in the country over three years.

For MTN, selling a portion of its 29% stake in IHS over time forms a key part of the company’s plan to raise $1.7 billion from asset disposals over the next 3-5 years. At the time of listing, MTN plans to sell a moderate 1.5% of its holding in IHS, which we expect
would raise c. $30 million. While the initial amount is immaterial in the context of MTN’s asset disposal program, owning a substantial stake in publicly listed IHS will improve MTN’s financial flexibility and allow it to sell down more, if and when required to reduce debt
and maintain its conservative financial policy while meeting its investment objectives.

As of 30 June 2021, MTN’s holding company reported net debt/EBITDA reduced to 1.4x from 2.2x six months earlier, thereby meeting the company’s announced aim to reduce holding company leverage below 1.5x. Despite meeting the deleveraging target, we
understand the company’s near term priority remains to reduce debt further before using excess cash for shareholder returns.