Cellnex finds another €800m to expand tower empire into Portugal

Cellnex has expanded its European footprint once again through the acquisition of Omtel, taking the infrastructure giants into the Portuguese market.

It is perhaps becoming difficult to fully convey the aggressive nature of Cellnex’s expansion over the last 12-18 months. This €800 million transaction is another to add to the increasing list of moves made by the firm to quickly expand the geographical relevance of the business. Altice Portugal and Belmont Infra Holding are the beneficiaries this time.

“With Omtel, we are not only integrating one of the leading independent telecommunications infrastructure operators in Portugal,” said Cellnex CEO Tobias Martínez.

“We are also committing to consistent growth in Europe, incorporating an eighth market – which naturally extends the current geographical coverage of the seven countries in which we already operate, and in this case especially due to the proximity and operational synergies that may arise with the Group in Spain.

“We are also incorporating a new client, Meo, which is the market leader and joins a rich and diversified mix of clients in Europe, covering the leading operators in the markets in which we operate.”

As part of the deal, Cellnex will acquire 3,000 mobile cell sites, roughly 25% of the total across Portugal, while there are plans through the build-to-suit (BTS) programme to deploy additional 350 by 2027. The current expansion plans have been tabled at a cost of €140 million.

While Cellnex is proving to be a very ambitious firm right now, this might be down to opportunism more than anything else. European telcos do not have the same scale as those in North America or Asia and have been financially strained over the course of the last decade. Most are now searching for funds to fuel 5G and fibre deployment plans, and divestment in passive infrastructure is proving to be a popular strategy.

The telcos financial situation has been well-publicised and Cellnex is one of a few different players seemingly hunting bargain deals for infrastructure assets across the continent.

Aside from the Omtel investment, Cellnex has also bought 1,500 sites from Orange Spain, Arqiva’s Telecoms division for £2 billion, Irish tower company Cignal, 70% of the operating company which manages Iliad’s 7,900 sites and 2,800 sites from Swiss telco Salt. Alongside this spree of acquisitions, Cellnex also obtained marketing and operating rights for 220 BT high towers distributed throughout the UK for 20 years and has signed numerous co-operation deals across the continent.

All of these deals were announced post-May 2019. It has been a very busy six months.

Cellnex has certainly noted telcos are in a precarious position and is throwing some serious cash to obtain assets. It might be expensive in the short-term, but it has guaranteed customers for as long as anyone can stare into the future; Cellnex and its 60,000 sites is a heavy-weight, profit making machine.

Iliad joins the tower divestment trend

Iliad has confirmed the sale of its tower businesses in France and Italy to European infrastructure giant Cellnex.

As part of the deal, a 70% stake of the tower infrastructure unit in France will be sold to Cellnex, while 100% of the Italian tower unit will be off-loaded. Heading the other direction will be €2 billion, a useful amount of cash as the 5G spending spree looms large on the horizon for Iliad.

Although this deal has been in the works for some time, it demonstrates an increasingly popular trend around the world. Telcos need cash for 5G and fibre upgrades, and tower businesses have been deemed as surplus assets. Vodafone, Reliance Jio, Telefonica and Altice Portugal are all companies who are using the passive infrastructure assets as a means to raise cash, and we suspect the trend will become more apparent through 2020.

What remains to be seen is whether the divestment in fixed, dependable assets will be in the future? Without owning the passive infrastructure, these telcos become tenants. Could this be considered a short-sighted move?

Iliad is a firm which needs to ease some pressure on executives and perhaps this is one way in which is can achieve this. Share price has marginally increased off the back of this announcement, though it is still 50% down on the price in May 2017. The company is also harbouring considerable debt, which needs to be addressed sooner rather than later.

For Cellnex, this is just business as usual. The sites acquired from Iliad adds to the 1,500 purchased from Orange in Spain earlier this month, as the infrastructure giant benefits from the telcos woes. Owning passive infrastructure might not be the most exciting business in the world, but it is very profitable.

Passive infrastructure is a long-term investment which will never stop paying off (highly unlikely anyway). Radio antennae will have to be placed somewhere after all, and networks are only going to become denser, increasing the demand for passive infrastructure. While the wallets are strained for the telcos, it could prove to be a very profitable period for the infrastructure companies who will accept the valuable assets without hesitation.

Arqiva to become the latest acquisition in Cellnex spending spree

Spanish infrastructure giant Cellnex has said it will acquire the Arqiva telecommunications business unit for £2 billion.

The transaction will make Cellnex the largest independent wireless infrastructure company in the UK, as well as the largest across Europe. The deal will add 7,400 sites to the footprint, as well as the rights to market an additional 900 across the UK. Cellnex’s total portfolio now exceeds 53,000 sites.

“The Arqiva Telecoms division acquisition is a key milestone for Cellnex,” said Tobias Martinez, CEO of Cellnex.

“Its strong UK asset-base, revenues and financial profile, combined with its long history at the heart of UK digital infrastructure, make it a perfect addition to our operations. This deal will not only add c.8,300 telecom sites to our portfolio but an experienced team that will further strengthen Cellnex’s demonstrated ability to meet its customers requirement.”

This is another step towards the aggressive expansion of the Cellnex business. Since the company’s IPO in 2015, Cellnex has invested or committed to invest €10.8 billion, via acquisition or construction. Between 2015 and 2027, should the company meet its own targets, it would have grown the asset portfolio by 42,000 structures.

Elsewhere in the M&A domain, Cellnex has entered into long-term strategic cooperation agreements with Iliad and Salt to acquire roughly 10,700 sites. It has also entered build to suit (BTS) programmes with the two telcos to build an additional 4,000 sites. Last month, it also announced the acquisition of Cignal in Ireland. This deal brought 546 sites into the portfolio, while there are plans to deploy another 600 by 2026.

And while owning structures across the continent is a very valuable business nowadays, another interesting element to this deal will be access to street furniture in London.

Arqiva currently manages concessions to use street furniture, lampposts for example, as locations for network infrastructure equipment in 14 London boroughs. This has proven to be somewhat of a controversial topic in recent months, with some telcos, such as BT, calling for open-access to street furniture to improve mobile experience.

“While the concessions model made sense in the early 2010’s when it first came into common use, the market and regulatory landscape have changed, and it’s become clear that exclusivity agreements act as a barrier to further 4G and 5G investments,” Paul Ceely, BT’s Director of Network Strategy, said at the time.

BT plans to increase small cell deployment across the capital for network densification plans. These initiatives are key to addressing network congestion in the busiest areas, but also compensating for the shorter coverage experienced when making use of higher frequency spectrum in the future.

These concessions are attractive to both the councils and the infrastructure companies. The councils collect the concession fee, while the infrastructure company assumes the business risk and collects the wholesale fee from the telco. Enough of these concessions and it turns into nice profit-maker, though it will not be making friends with the telcos, who effectively want something for nothing.

With existing relationships with all four UK MNOs, as well as joint-ventures MBNL and CTIL, this could prove to be a useful transaction for Cellnex. Despite 5G being launched across the UK, the rollout has been slightly staggered due to the on-going Supply Chain Review. There is plenty of profit to collect as the 5G bonanza gathers steam.

Iliad flogs a bunch of towers to reduce debt pile

French telecoms conglomerate Iliad is selling most of its tower assets in France and Italy to Cellnex for €2 billion.

Iliad has debts in excess of €4 billion and seems to think paying some of them off might be an idea. Fellow French giant Altice has recently had to do a bunch of debt refinancing but it apparently had to pay a premium to do so. European telcos are increasingly inclined to sell and lease back assets like towers to free up cash for 5G investments and that sort of thing.

In France Iliad will be selling 70% of the company that manages 5,700 cell sites to Spanish infrastructure specialist Cellnex, while in Italy it’s offloading the whole company that takes care of 2,200 sites. Right now the whole process is at the ‘exclusive negotiations’ stage but that seems like a formality.

“This transaction is part of a long term industrial strategy allowing us to accelerate rollout of our 4G and 5G networks and to increase Iliad’s investment leeway,” said Thomas Reynaud, Iliad’s CEO. “This transaction supports the group’s new growth and innovation cycle. It enables more efficient infrastructure roll-outs in the future while meeting the challenges of further increasing territory coverage.”

On top of this Cellnext is acquiring 90% of the company that owns 2,800 sites in Switzerland from Salt.

“[These deals] allow us not only to reinforce our position as the main independent infrastructure operator in France, but also to decisively strengthen our platform in Italy, a key a strategic market, and significantly expand our foothold in Switzerland,” said Cellnex CEO Tobias Martinez.

“Furthermore, Cellnex strengthens its role as a neutral host by having two major anchor tenants within its sites network. The combined effect of these agreements is an increase of our current  portfolio across six European countries by more than 50% –to 45,000 sites in total. The latter allows us to properly assess the very quantum leap nature of these deals.

“A greater density and capillarity of our sites networks means a differential added value that enhances Cellnex’s role as a natural partner for all mobile operators in Europe, meeting their densification needs in the current 4G roll-out while accelerating that of 5G.”