MTN Group, Africa’s largest telecom operator, is testing investor appetite as it prepares to fund its proposed takeover of IHS Towers, a deal that could add to its borrowing needs.

The South African telecom company met international bond investors in London last week as it weighs its financing options for the acquisition, which would require about $2.2 billion to buy the IHS shares it does not already own.

No new debt was announced during the meetings, but the discussions give MTN a chance to gauge demand from international investors after nearly a decade away from the bond market.

The timing is significant. MTN is due to repay a $500 million international bond in October, although the company says it has enough resources to settle the debt without raising new funds.

Its bigger financing challenge is IHS Towers, whose proposed acquisition has a total value of $6.2 billion, including debt. MTN plans to fund about half of the share purchase from its own cash, with the balance expected to come from cash generated by IHS through the sale of its Latin American assets.

MTN keeps funding options open

The meetings come as MTN prepares to repay a $500 million international bond that matures in October. The company has said it has enough resources to settle the debt without issuing new bonds.

The bigger funding question is its proposed acquisition of IHS Towers. MTN announced the deal in February at a total enterprise value of $6.2 billion, including debt. The $8.50-per-share offer gives IHS an equity value of about $2.9 billion.

MTN, which already owns 24.7% of IHS, expects to pay about $2.2 billion to acquire the remaining shares. About half of that amount is expected to come from MTN’s own cash, while the rest will come from cash generated by IHS from the sale of its Latin American assets.

IHS will retain its existing debt, while MTN has indicated that additional borrowing will form part of the wider financing package.

IHS deal brings towers back under MTN

The acquisition would also mark a major shift in MTN’s strategy after years of outsourcing its tower infrastructure.

The company would take ownership of about 29,000 towers across Nigeria, Côte d’Ivoire, Cameroon, Zambia and Rwanda.

IHS shareholders approved the transaction Aug. 4, while Nigeria’s competition regulator granted conditional approval. MTN agreed to sell up to 30% of IHS’s Nigerian business to help reduce the target company’s debt.

MTN Group is Africa’s largest telecom operator, with nearly 320 million subscribers and half-year revenue of R115.3 billion ($7.21 billion).

Its scale gives it a stronger position than most African corporate borrowers in international debt markets.

MTN has not issued an international bond since 2016. With corporate borrowers relatively uncommon in Africa’s Eurobond market, the London meetings could give the company a clearer read on investor appetite before it decides whether to raise new debt.