By Ola El-Shawarby CFA, Senior Analyst, David Semple, Portfolio Manager, Emerging Markets Equity Strategy, and Oksana Miller, Product Manager, VanEck Global
“Remote” consumption, implicit in digitization, telemedicine, and video gaming, is replacing “social” consumption such as travel and other out-of-home activities. Exceptional, structural growth companies are leading the way in responding to this “new normal” of consumer behavior. We have witnessed transformational changes taking place across emerging markets, across continents like Asia and South America , and Africa is no exception. It is home to Helios Towers , Safaricom, and Fawry —some of the region’s most resilient and truly inspiring digitization innovators, in our view. Africa’s Digitization: Unique Play in a Massively Underpenetrated Continent
Africa is the world’s second largest and second most populous continent (after Asia), with a massive opportunity for digitization of its economy. As displayed in the graph below, African countries remain grossly underpenetrated in comparison to other emerging markets, creating what we view as ample opportunity for alpha generation in the region. Africa’s Lower Relative Digitization Penetration Creates Infinite Opportunity for Alpha Generation
Source: Helios Towers Company Data, GSMA Intelligence Database. Data as of June 2019. Helios Towers: Connecting Africa by Bridging the Telecom Infrastructure Gap
Connectivity is key for socio-economic development, and building out the telecom infrastructure is the foundation. Helios Towers (“HT”), an independent telecom tower infrastructure company with over 7,000 towers across Africa, is one of the leading players in Africa’s shifting telecom landscape.
HT is operating in some of the less accessible, underpenetrated and demographically attractive sub-Saharan African countries, with its largest exposures in Tanzania, The Democratic Republic of Congo (“DRC”), and Ghana. We saw an attractive structural growth opportunity in this company, as it directly addresses the growing need for telecom infrastructure due to the rising penetration of mobile phones, increased mobile data usage and evolving technology.
There is also a global trend of mobile network operators (“MNOs”) unbundling their telecom towers to independent companies to free up balance sheet capacity and better manage costs. This trend is welcomed by governments, as tower sharing by telecom operators through independent tower infrastructure companies both expands network coverage over time and is more environmentally friendly. Independent players like Helios Towers are set to benefit.
The company’s strong management, its solid execution track record and liquid balance sheet position HT particularly well to capitalize on M&A opportunities arising in this current market environment, along with “build to […]
