THE RISE OF AFRICA

Location, Location, Location.

December 1, 2023

Between Global Giants

Nestled between two of the world's superpowers, Africa stands in an enviable and strategic position today, courted by both the East and the West. This vast continent, rich in natural resources and boasting a large, youthful population, has become a focal point in the global power play. As the United States and China vie for influence and partnership, Africa's role on the world stage is increasingly pivotal. Its abundant resources and demographic dynamism make it a key player in shaping the future of global economics and politics.

Africa's allure extends beyond its wealth of natural resources; its geographical location is equally significant in the strategic calculus of global powers. Consider the potential implications if China were to establish military bases along Africa's west coast. Such a move would place them directly across the Atlantic from the United States, reshaping the geopolitical landscape. This possibility underscores Africa's critical role in global security dynamics, making it not just a resource-rich land, but a chess piece in a much larger game of international influence and power.

For many years now, investors around the globe have been turning their gaze towards Africa, seeing it as the next frontier ripe for enormous investment returns. The continent's vast potential is drawing attention, but while many are drawn to its rich resources and the prospect of mining ventures, my focus shifts to a different, less capital-intensive, yet equally promising area. This article spotlights a company that is tackling one of the world's most pressing challenges: bridging the digital divide by bringing internet and telecommunications to the remote and underserved rural regions of Africa. Their innovative approach not only has the potential for significant returns but also plays a crucial role in connecting and empowering communities across the continent.

Connecting The Unconnected

Land of Opportunity.

For those of us who vividly recall the dawn of the cellular era in the mid-1990s, it was a time of remarkable change. I remember how it began as a novelty — a few friends proudly carrying around their mobile phones, a rare sight that gradually became a common occurrence. What started as a luxury for the few swiftly transformed into an essential tool for the many. Today, in places like North America, having access to a cellular phone is as commonplace as having a pair of shoes. It's a transformation that has reshaped the way we live, communicate, and interact.

Now, we're on the cusp of witnessing a similar revolution, this time in rural Africa. It's a monumental shift, mirroring the past but on a much grander scale. Imagine communities, once isolated and disconnected, now tapping into the vast network of global communication. And this is just the beginning. The wave of connectivity is set to sweep over rural South America next, and eventually, it will encompass the entire planet. Even the most remote corners of the world are on the brink of joining the global conversation.

I've witnessed this unfolding before, a pattern of technological integration that starts small and then explodes in scope. It's a story I'm seeing replayed in rural Africa: initially, a handful of people gain access to cellular connectivity. Gradually, this access expands, spreading wider and wider, until it blankets the entire region with affordable, widespread communication. It's a pattern I recognize, and it's presenting one of the most exhilarating investment opportunities I've encountered in my years of investing. I've identified a company at the forefront of this revolution — an innovative, disruptive force that's not just participating in this change; they're driving it. This isn't just about investing in a great business; for me, this is personal. It's almost an opportunity to go back in time and invest in something I wish I had the chance to invest in in the mid-90s when it first came into our lives. Let's dive in and find out more...

Company Overview

Originating from Quebec, Canada, NuRAN Wireless (CSE:NUR) is a trailblazer in rural wireless network coverage.They provide mobile infrastructure solutions specifically built to bring mobile and broadband connectivity to remote and geographically isolated regions. Think about it, this company has found a way to bring internet and cellular communications to the most remote places in the world and they do so profitably. This innovative company is revolutionizing communication in remote areas, offering accessible and cutting-edge 2G, 3G, and 4G technology solutions. NuRAN's mission is ambitious yet essential – they are creating new communication possibilities for over a billion people. By effectively bridging long distances with reliable connectivity, NuRAN is not just connecting people; it's transforming how entire communities interact with the wider world.

NuRAN Wireless and its partners have pioneered what I believe to be the most cost-effective and dependable solution for the challenge of connectivity in rural and remote regions. They've innovatively upended the traditional telecommunications model, introducing Network-as-a-Service (NAAS). In this model, NuRAN takes on the roles of building, owning, and operating cellular towers. They then enter into contracts with mobile network operators (MNOs), who pay a guaranteed minimum monthly revenue. This approach not only simplifies the expansion of network coverage for MNOs but also ensures consistent revenue for NuRAN, making it a win-win scenario in the telecommunications arena.

What sets NuRAN apart is its utilization of smart, off-grid power solutions. By harnessing renewable energy to power their cellular sites, NuRAN significantly reduces operational costs. This sustainable approach not only makes remote connectivity feasible but also cost-effective. The company’s potential for growth is closely tied to the speed at which it can deploy its towers. This is where NuRAN's strength lies: it operates with low capital expenditure while generating steady, recurring monthly revenues. Additionally, the scalability of its business model means that as NuRAN expands its network, its impact and profitability are set to grow exponentially.

A Financial Lifeline for Expansion

As we delve into the intricacies of NuRan Wireless' operations, it's imperative to shed light on a crucial aspect: financing. Since August 2022, NuRan has been in keen anticipation of a major financial injection of US $27M from a European Development Finance Institution (DFI). This prolonged wait, now over a year, has raised concerns among shareholders and intrigued potential investors, leading to active discussions in public forums. The delay in securing this funding is attributed to intricate due diligence processes by the lenders, including a comprehensive review of all NuRan's suppliers. Particularly, this encompasses the finalization of a review of a key supplier in the Democratic Republic of the Congo following a recent change of control transaction, along with a thorough assessment of all necessary authorizations and licenses for operations in the DRC and Cameroon. Despite these challenges, NuRan's management maintains a confident stance, believing firmly that the receipt of funds from the European Infrastructure Bank (EIB) is imminent, not uncertain.

This DFI loan is far more than mere capital; it's a vital lifeline poised to unlock NuRan's full potential. Primarily aimed at funding the deployment of over a thousand sites across Cameroon and the Democratic Republic of the Congo (DRC), this loan is pivotal for NuRan's ambitious expansion plan. With the DFI loan, NuRan is set to rapidly accelerate its Network-as-a-Service (NaaS) model, significantly enhancing its operational capabilities and scale.

As per the company's October 2023 presentation, the future looks promising for NuRan Wireless, contingent on the closing of the DFI loan and the receipt of the $27M USD. With these funds in place, NuRan projects an ambitious expansion: a target of having at least 1,500 towers operational by the end of 2024 and increasing this number to 2,500 by the end of 2025. This growth is not just in infrastructure but also in financial terms. Subject to the realization of the DFI financing, NuRan is expecting to see a significant surge in revenue, with a forecast of around US $20 million in consolidated gross revenue for 2024, and a substantial increase to approximately $50 million in 2025. The Company expects to achieve EBITDA of US$6 million for 2024 and US$25 million for 2025. Again, these projections are contingent on the closing of the DFI loan.

Notable Developments and Milestones

Here are key developments and milestones that illustrate NuRan Wireless' progress towards their goal of constructing, owning, and operating 10,000 sites:

September 2019: NuRAN Signs $4.75M Contract for LiteRAN 2G, LiteRAN xG, and Nexus Core Network. Under its contract with Intelsat, NuRAN will deliver and install complete cellular sites, enabling mobile broadband service to outer islands of the Marshall Islands thanks to LiteRAN xG, NuRAN’s evolutive 2G-3G-4G multi-standard radio access network solution and NuRAN’s Nexus core network solution.
February 2021: NuRan Announces Major Network-As-A-Service agreement with Orange DRC. Under the terms of the agreement with Orange DRC, NuRAN is partnering with Orange DRC and various multi-network operators, or MNOs for the purpose of constructing and operating 2,000 new NuRAN towers over the next 40 months throughout the Democratic Republic of the Congo (DRC) in Central Africa to meet pent-up demand, with a particular focus for rural communities with populations around 5,000. This agreement is estimated to generate gross revenue for the Company of up to CAD$500 Million during the term of the agreement commencing February 5, 2021.
March 2021: NuRan announces expasion of NAAS agreement with Orange Cameroon. Further to its previously disclosed Network as a Service (“NAAS”) contract with Orange Cameroon SA announced on October 29, 2020, Orange has exercised its option under the agreement to add an additional 120 networking sites in Cameroon. The original contract for 122 sites entered into by NuRAN and Orange is a Network as a Service contract with expected gross revenues of up to $20M CAD over the term of the agreement. Total sites under contract in Cameroon: 242.
December 2021: NuRan signs agreement for a minimum of 250 sites with MTN in the Republic of South Sudan. NuRan announces it has signed an agreement for a minimum of 250 sites with MTN Group Limited (MTN) for the deployment of rural sites under the NAAS in Republic of South Sudan for the deployment of sites through the build, own, operate, and transfer (“BOOT”) revenue share model. The 10-year agreement is estimated to represent approximately CAD $1,800 of revenue per site per month or CAD $57 Million in revenues over the course of the contract, with the potential for more sites to be added.
April 2022: NuRAN Announces a Contract with MTN for 150 sites in Namibia. The company announced a contract with MTN in Namibia to deply suburban and rural telecom sites for a minimum of 150 sites. All the sites delivered will be in 4G demonstrating the evolution and expandability of its NAAS model and once the project is completed annual revenue will be US $8 million.
October 2022: NuRan signs a US $75M NAAS agreement with MTN Ivory Coast. NuRan signs an agreement for up to 1,000 sites with MTN Ivory Coast for the deployment of rural sites under the Network-as-a-Service (“NaaS”) business model. The 5-year agreement with MTN Ivory Coast is expected to be the Company’s second largest contract in terms of number of sites with the potential to generate over US $75 million in gross revenue over the course of five years. The contract includes an automatic renewal for an additional 5 years.
December 2022: NuRAN Announces a Collaboration with Trans Africa Towers in DRC NuRan and Trans Africa Towers, a leading telecommunication infrastructure service provider in the African sub-region, announce their collaboration to expand mobile connectivity in Democratic Republic of the Congo (DRC).
January 2023: NuRan signs NAAS agreement with Orange Madagascar for up to US $90M. NuRan announces the entry into a Network-as-a-Service (“NaaS”) agreement with Orange Madagascar for the deployment of up to 500 rural networking telecommunication sites under the NaaS business model in the east coast of Madagascar. The 10-year agreement is the Company’s third contract with Orange with over US$90 million in potential gross revenue at an approximate rate of US$1,500 per site per month with an estimated gross margin of 70%.

0 Sites under contract.

0 Objective within 5 years

0 Countries signed.

Case Study: Cameroon.

In Cameroon, NuRan Wireless has made significant strides in its collaboration with Orange Cameroon. Initially contracted in October 2020 to construct 122 sites, this agreement was subsequently expanded, bringing the total to 242 sites. As of October 2023, through a video presentation, the company reported that 79 of these sites are now operational ('on air'), with 59 having been formally 'accepted'. Notably, the highest-performing site in this region is generating an impressive $4,133 in gross monthly revenue.

To build the remaining 163 (242-79) sites, NuRan has secured a local financing solution, arranging a $750k credit facility with a Cameroonian commercial bank. Management believes that with this support, they can have all 242 sites built and operational by the middle of 2024, marking a significant milestone in NuRan’s expansion in Cameroon.

NuRAN Wireless' financial projections, outlined in their October presentation, offer an encouraging outlook in line with their strategic plans and ongoing developments. Assuming an average revenue of USD $1,380 per site per month, the company's financial forecasts are on a promising path. These projections highlight the vast potential ahead for NuRAN, particularly when considering the large number of sites they plan to bring online. This forward-looking perspective is key to grasping the magnitude of opportunity NuRAN is poised to capitalize on, as they expand their reach in connecting remote regions.

CAMEROON FINANCIAL PROJECTIONS

Date	Dec'23	Mar'24	Jun'24
Sites accepted (live)	89	179	242
Monthly Gross Revenue	$122,820	$247,020	$333,960
Overhead	$17,300	$23,026	$30,648
VSAT	$19,333	$19,333	$19,333
Repair & Maintenance	$9,498	$14,287	$19,316
Insurance	$4,519	$6,797	$9,190
Lease	$4,639	$6,979	$9,435
Total monthly expenses	$55,289	$70,422	$87,922
Monthly Contribution	$67,531	$176,598	$246,038
Contribution Margin (%)	55%	71%	74%

In Cameroon, where NuRAN Wireless aims to reach the significant milestone of 242 operational sites by June 2024, the company is positioned to achieve substantial monthly revenue. Upon realizing this goal, these sites could collectively generate approximately $330,000 in monthly revenue. This revenue is derived from the payments NuRAN receives from Mobile Network Operators (MNOs) each month for operating these sites. Given the low maintenance nature of these sites, they boast a high contribution margin. This margin represents the amount of money available for NuRAN to reinvest in further site development or to reduce its debt, thereby fueling the company's continuous growth and enhancing its capacity to revolutionize connectivity in remote areas.

Expanding our view beyond Cameroon to other regions where NuRAN Wireless is establishing sites, the company's projections become even more ambitious. Assuming the much-anticipated financing from the European Infrastructure Bank materializes, NuRAN believe it can build as many as 1,500 sites by the end of 2024. However, let's consider a more conservative scenario where they manage to get only 500 sites up and running within that timeframe. The table below will illustrate the projected revenues at different operational levels – 500, 750, and 1,500 sites – offering a clearer picture of NuRAN's potential financial growth.

FINANCIAL PROJECTIONS FOR 2024

Number of Sites	500	750	1500
Gross Annual Revenue (in USD)	$8.3M	$12.4M	$24.8M
Contribution Margin (%)	55%	55%	55%
Contribution	$4.6M	$6.8M	$13.6M

Securing the DFI loan early in 2024 would be a crucial milestone for NuRAN Wireless. As an investor assessing the company's potential in 2024, a cautious approach is advisable. Let's consider a conservative estimate: if NuRAN achieves 500 operational sites by the end of 2024, up from its current tally of around 164, the company is likely to generate approximately $8M in revenue for the year. Should NuRAN expedite its deployment to nearly 1,000 sites within the same timeframe, the impact on its financials could be substantially greater, potentially driving the stock price well above its current level.

Trendpost Takeaway

As I reflect on the unfolding narrative of NuRAN Wireless, I'm reminded of the dawn of the internet era in the 1990s. Back then, the internet transformed personal computers into gateways of global communication, and I vividly remember those exciting days. Embracing technology that enabled instant, widespread communication was a no-brainer. Today, I see a parallel evolution unfolding in rural Africa, and investing in NuRAN Wireless feels like placing a strategic bet on this emerging trend. Now, 30 years after the internet first made its way into our lives, people in rural Africa are on the brink of experiencing the internet for the first time.

There are countless fascinating facets to the NuRan Wireless narrative. Its Network-as-a-Service offering stands out as particularly groundbreaking, providing a disruptive solution that enables mobile network operators to scale up without the burden of capital investments. What captivates me the most is the company’s highly efficient business model. The ability to construct a low-maintenance site for approximately $24,000 USD, which then yields about $1,500 in monthly revenue, is a testament to this operational efficiency. The added security of guaranteed minimum monthly revenues and lengthy contracts ranging from 5 to 10 years further enhances its appeal.

In February 2021, when NuRan announced its contract with Orange to build 2,000 sites in the DRC, the stock leaped from the 40-cent range to above $2.00 in just a matter of days. Today, the company has significantly advanced in obtaining all necessary permits, has gained more expertise in deploying and operating sites, and already has live sites generating revenue. But let's be clear, this remains a highly speculative venture. There are no certainties that things will unfold as management hopes. Yet, I still see merit in betting on this company at its current price level. Multiple tailwinds favor its success: African MNOs plan to build around 30,000 cellular tower sites across Africa in the next five years. NuRan's use of local labour and companies in site construction, contributes to local economies and sustainability. Moreover, the heightened interest from both China and the US in forming partnerships and gaining influence on the continent only adds to the potential for substantial returns from investing in this innovative company.

An important aspect of NuRan's success is its ability to deliver the most affordable yet highly reliable services in remote locations, a feat made possible by its adoption of smart, off-grid power solutions. A key player in this achievement is Clear Blue Technologies, a company we previously highlighted and the inaugural addition to our portfolio. Interestingly, Clear Blue recently announced its Q3/2023 results on November 29th, showcasing impressive performance. The fates of NuRan and Clear Blue are closely linked, and both present significant opportunities to invest in the burgeoning trend of connecting the unconnected. However, it's crucial to approach these investments with caution due to their high-risk nature. By strategically limiting the size of our stakes in these companies, we can aim to capitalize on their potential rewards while safeguarding our portfolio.

NURAN WIRELESS

Connecting The Next Billion.

Remember that the content of this newsletter is neither a stock recommendation nor investment advice. This is just something to consider. You can access my watchlist through the link below. By clicking the link below you accept all responsibility for any potential losses that might result from buying any of the stocks mentioned in this newsletter.

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