Telecom · January 2026 · 6 min read
Towerco covenants in a higher-rate, weaker-currency world
Tower portfolios across Sub-Saharan Africa were built on a set of assumptions about cost of capital, tenancy and local currency that were reasonable ten years ago and are not reasonable now. The refinancings coming due over the next thirty-six months will price that shift in for the first time.
The argument
Three pillars of the towerco model are re-rating simultaneously: dollar-denominated cost of capital has stepped up, tenancy growth has softened as operator consolidation plays out, and lease escalators that were assumed to sit above inflation are now well below it in every major SSA currency. A sensitivity table on one variable at a time understates the risk. A joint Monte Carlo across the three, with FX correlated to inflation, typically produces a P20 DSCR that breaches the existing covenants — the reason several recent refinancings have been re-cut at the last minute.
What we see in the field
The towercos that have refinanced smoothly in the last twelve months share one habit: they run the covenant test as a stochastic simulation each quarter, not as a point estimate at year-end. That single discipline surfaces the breach six months earlier and gives the CFO room to restructure rather than negotiate under pressure.
What it changes
For CFOs, the next refinancing is the one where the new cost of capital is priced in for real. For sponsors, the covenant that was comfortable is now the covenant that changes behaviour.
Where to start
Before the next refinancing, run the DSCR as a joint Monte Carlo across cost of capital, tenancy curve and local-currency escalator. The scenario at which the covenant breaks is the number that matters, not the base case.
