FCCPC’s Conditional Approval for MTN/IHS Acquisition - Some Key Commercial Considerations

The recent conditional clearance by the Federal Competition and Consumer Protection Commission (FCCPC) and the Nigerian Communications Commission (NCC) regarding MTN Group’s $6.2 billion acquisition of IHS Holding Limited raises important questions as to whether the conditions imposed by the FCCPC adequately address the competition concerns arising from the transaction.

Commercial Context for the FCCPC Conditional Approval of the MTN/IHS Merger

The FCCPC is reported to have imposed a structuring condition requiring MTN to divest a 30% equity stake in the Nigerian component of IHS to local investors. It appears that the primary rationale for imposing this condition is the need to address vertical foreclosure risks, specifically, the concern that MTN could leverage control of IHS to disadvantage competing Mobile Network Operators (MNOs) and ultimately customer. The issue which we address in this Insight series, is whether or not a plain 30% equity sell-down to local investors can actually address the competition concern created by MTN’s continued control of IHS.

Some Key Legal Considerations for Business Leaders

A pure equity sell-down as currently notified to the public, faces severe analytical limits. We discuss some below.

(a)  Alignment of Financial Incentives: A minority shareholding generally operates as a purely economic stake. We expect that financial or institutional investors taking up the 30% stake are likely to share a common and continuing objective with the 70% parent, which is to maximize the overall equity value, return on equity (ROE), and dividend yield of IHS.

(b)  Lack of Counter-Incentive to Restrain Pricing: Financial investors prioritizing capital appreciation have no independent economic incentive to champion lower colocation rates or favorable lease terms for competing MNOs, unless those competitors' default risk directly threatens total tower utilization.

(c)   The Governance Gap: Even if the FCCPC attaches remedial governance conditions, such as independent board seats allocated specifically to minority shareholders, veto rights over pricing, or open-access ring-fencing clauses, we believe that the economic alignment between the controlling 70% parent and the 30% minority is likely to remain largely unified behind profit maximization. Without explicit negative clearance or veto rights over daily commercial access and capacity allocation, the minority stake may fail to disrupt MTN's fundamental ability to exercise controlling influence over the market.

2.     Notwithstanding these limits, if the conclusion of the FCCPC is that vertical integration creates a Substantial Lessening of Competition (SLC), the starting assumption should be that a partial (30%) sell-down is analytically inadequate. In which event, the more logical structural conclusion should be to order MTN to fully divest its IHS shareholding to an independent third party, or requiring MTN to sell a controlling interest (51%+) to an independent infrastructure operator, rather than placing a passive minority stake with financial investors.

3.     In the absence of full structural separation, it may also be effective to tightly enforce a number of comprehensive behavioural access safeguards, which includes:

(a)    Pricing: Mandatory reference offers and benchmark pricing requiring IHS to publish transparent, non-discriminatory Master Lease Agreements (MLAs) with regulated price caps.

(b)   Capacity Allocation: Operational conditions that strictly prohibit IHS from prioritizing MTN's 5G rollout, site expansions, or upgrades over rival operators.

(c)    Commercial Information Firewalls: Strict structural barriers preventing MTN's downstream retail team from accessing confidential expansion plans or network mapping data submitted by rival MNOs.

(d)   Independent Monitoring Trustee: A particularly important safeguard would be the appointment of an independent monitoring trustee, funded by the parties but accountable directly to the FCCPC, to oversee compliance with the FCCPC’s behavioural commitments. The trustee could be given authority to inspect capacity and access records, audit pricing and service terms, review complaints from MNOs, require relevant information from the parties and report suspected non-compliance directly to the FCCPC.

Monitoring trustees are commonly used in competition remedies where compliance requires ongoing oversight or involves technically complex obligations that a regulator may not be able to supervise on a day-to-day basis. The European Commission, for example, uses monitoring trustees in both structural and behavioural remedies, including access remedies, to monitor compliance and their effective implementation. In divestiture cases, trustees may monitor the viability of the divested business, oversee the separation of businesses and personnel, and prevent the transfer or use of competitively sensitive information.

The US Federal Trade Commission similarly appoints independent monitors where merger remedies involve continuing or technically complex obligations. The FTC describes such monitors as the Commission’s “eyes and ears” as they can access relevant information, identify compliance concerns and assist the Commission in resolving issues as they arise, while the Commission retains responsibility for determining whether an order has been violated. This model has also been used specifically in telecommunications. In the AOL/Time Warner merger, the FTC appointed a monitor trustee with responsibility for scrutinising compliance with technically complex obligations under the consent order.

For the MTN/IHS transaction, such a mechanism could make the FCCPC’s access and non-discrimination commitments substantially more meaningful by providing continuous, independent oversight of how those commitments operate in practice, rather than relying principally on complaints or periodic regulatory intervention after a competitive harm has occurred.

Competing Operators Can Challenge the Conditional Clearance?

A key question is whether competing telecommunications operators are required to accept the FCCPC’s conditional clearance or can challenge the adequacy of the conditions imposed.

We consider that competing operators can challenge the conditional clearance, as the extant legal framework provides a basis for an affected or interested party to seek a review of the conditions imposed, particularly where the remedy may be insufficient to address the competition concerns arising from the transaction.

Key Takeaways for Business Leaders

(a) A regulatory remedy that changes ownership does not necessarily address the underlying competition risk. Businesses should assess whether the conditions imposed actually change the market dynamics that gave rise to the regulatory concern.

(b) In infrastructure transactions, particular attention should be paid to the practical terms of access, pricing and capacity allocation. A minority sell-down may achieve local participation objectives without, by itself, resolving the underlying competition concerns.

(c) If the concern is about access to critical telecommunications infrastructure, pricing, capacity allocation and non-discrimination, the effectiveness of the remedy should be measured against those issues.

This publication is provided Balogun Harold for general informational purposes only and does not constitute legal advice. Specific circumstances may require tailored legal analysis. For consultation requests, please reach out to your usual Balogun Harold contact or via support@balogunharold.com