How one telecoms player solved the PFI puzzle

Soon after his appointment as president of the World Bank, Ajay Banga promised to herd the vast resources of private capital in developed markets towards desperately needed infrastructure projects in developing economies.
In doing so, Banga, the former chief executive of Mastercard, placed himself within a long-established tradition of World Bank presidents attempting to divert private capital flows from wealthier countries towards poorer ones.
Such efforts can be traced back to the early 2000s when the UK, through its Department for International Development that is now part of the Foreign Office, led the effort to export Britain’s own private finance initiatives as a model for “crowding in” private investment.
These PFI partnerships — where theoretically a small amount of public investment is used as an anchor to encourage much larger funds from the private sector — have proved largely unsuccessful. Yet Helios Towers, which operates telecom tower sites across Africa, has bucked the trend.
According to its chief executive, Tom Greenwood, some of the private sector reluctance stems from a problem of perception about the stability of developing economies.
“In most markets across the continent [of Africa], and certainly our markets are good examples of this, changes within tax and regulatory environments are very rare,” he said. “I would probably say that there are more changes in those areas in the West.”
Helios Towers was originally established at the tail end of the recession in 2009 by Helios Investment Partners, then the largest Africa-focused private equity firm, with help from British International Investment (BII), together with $350 million in capital from private investors including George Soros and Rothschild Investment Trust. BII is one of a number of so-called development finance institutions (DFIs), more commonly referred to as development banks.
Ten years later Helios Towers went public on the London Stock Exchange and now, as a constituent of the FTSE 250, it owns and operates more than 14,000 telecom tower sites across nine countries in Africa and the Middle East. Its shares have risen in value by about 10 per cent this year.
Helios’s private equity backers described the BII investment as “critical” to reassuring private investors at a particularly difficult time for raising capital. The company also successfully employed the model when issuing its first public bond in 2017.
“We had a couple of DFIs anchoring that bond,” Greenwood said. “When we launched it to the market and we were talking with the BlackRocks and the Fidelities, we could say, ‘well, we’ve already got over 10 per cent of the book subscribed from these governmental DFIs’ and that provided some level of comfort.
“We’ve since refinanced these bonds and upsized them a few times and each time, in fact, we’ve brought more DFIs in.”
Yet Helios’s success in using small public investments to assuage the concerns of much larger private fund managers stands in stark contrast to others.
Figures for the World Bank’s own DFI, the International Finance Corporation, for 2023 showed it only spent about 15 per cent of its funds — some $2.5 billion — on long-term finance for infrastructure, with the rest dedicated to banking, manufacturing or other areas.
At the same time, the bank’s public sector financing for infrastructure stood at $10.5 billion, or about 27 per cent of its total business.
According to Greenwood, Helios’s success is in some sense down to the investor-friendly model of telecoms, which is comparatively less capital-intensive, while the potential number of customers counts essentially everyone with a mobile phone.
“Since the dawn of the telecoms industry, a lot of the research and development has come largely from the private side because the potential for future revenue and returns are there,” he said.
“Ultimately it’s economics that drives that [investment], which is relatively tangible in the telecoms sector. Maybe in other sectors it’s a bit less tangible.”
Charles Kenny, a senior fellow at the Centre for Global Development and formerly a senior economist at the World Bank, agreed. “One of the reasons everybody got excited about public-private partnerships [originally] was that in telecoms you saw countries moving towards private competition and suddenly there was a huge amount of investment in pretty much every country in the world,” he said.
This aspect of competition has proved particularly crucial, both to the success of investment in telecoms and its failure elsewhere.
“Regulating [infrastructure investment] and contracting it is at least as hard, if not harder, than making a state-owned enterprise work well,” Kenny said.
“Again, telecoms is an exception because you don’t need to regulate it as much. One of the advantages of competition is it reduces the need to regulate everything, because you let the market take care of it. That’s far from completely true in telecoms regulation, but it’s less central to the exercise than it is when you’ve got a monopoly provider.”
While it is unclear whether others will be able to replicate Helios’s success in other areas of infrastructure such as water or energy, Greenwood is hopeful that at least it can build confidence in an area that major investors have long avoided.
“The more and more success stories there prove the point that you can run successful businesses which really deliver, both for the populations that they serve and ultimately also the investors,” he said. “That creates a spiralling effect over time, so I think to some extent it’s a timing thing and it’s building that confidence in more and more investors globally.”