IHS Towers ($IHS), the world’s fourth-largest independent tower company, has laid off more than 100 employees as it grapples with the financial impact of Nigeria’s ongoing currency devaluation. Nigeria, which is IHS’s largest market, has significantly squeezed the company’s profits, forcing it to make tough decisions to maintain operational efficiency. According to sources familiar with the matter, the layoffs affected several departments, with senior employees and the network surveillance team bearing the brunt of the cuts.
Impact on Senior Employees
Many of the senior employees affected by the layoffs had been with the company for over a decade, contributing to its growth and expansion across Africa. These employees were offered “significant” severance packages as compensation for their years of service. The source emphasized that the decision to downsize was not due to underperformance but was a direct response to the challenging economic environment in Nigeria.
Despite its global presence, IHS Towers has faced mounting pressure from investors due to its poor financial performance in recent years. The company reported a staggering $409 million loss in Q4 2023, primarily attributed to the currency devaluation in Nigeria, which significantly reduced revenues and led to foreign exchange (FX) losses from USD-denominated loans.
Financial Challenges and Market Response
The company, which employs around 1,600 people, recorded a $1.9 billion loss in 2023, marking a 304% increase from the previous year’s losses. IHS Towers’ market capitalization has plummeted to $1.3 billion, a significant decline from its $7.3 billion valuation in 2021. Although the share price saw a slight recovery in August 2024, trading at $3.56, it remains far below the 2021 peak of $21 per share.
IHS Towers operates over 40,000 telecommunications towers across Africa, which account for roughly 25% of the continent’s tower infrastructure. These towers are leased to major telecom operators like MTN and Airtel, forming the backbone of Africa’s digital economy by supporting internet connectivity. However, rising fuel prices, maintenance costs, inflation, and FX volatility in Nigeria have increasingly strained the company’s financial position.
Operational Costs and Future Outlook
In the first quarter of 2024, IHS Towers reported spending $88.8 million on power, its largest operating expense, highlighting the challenges of managing infrastructure in a volatile economic environment. Additionally, the company spent over $1.5 billion on investing activities in 2023, but concerns have been raised about the transparency of these expenditures. A shareholder pointed out in a June 2023 letter that the company’s published statement of cash flows lacks clear explanations for these significant investments.
Gimba Mohammed, IHS Towers’ Director of Government and External Relations, disclosed at a conference in August that the company had to spend more than ₦14 billion to fix fiber cuts between 2022 and 2023, further exacerbating its financial woes.
As IHS Towers continues to navigate the economic challenges in Nigeria, the recent layoffs serve as a stark reminder of the impact that macroeconomic factors can have on even the largest players in the telecommunications infrastructure sector. The company will need to strategically manage its resources and optimize operations to weather the ongoing financial storm and restore investor confidence.
Conclusion
The layoffs at IHS Towers are a clear indication of the challenges faced by multinational companies operating in economically unstable regions. While the company’s extensive tower infrastructure is crucial for Africa’s digital future, its ability to manage costs and maintain profitability in the face of currency devaluation and rising expenses will be critical to its long-term success. Investors and stakeholders will be closely watching how IHS Towers adapts to these challenges in the coming months.