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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.”
Vodafone UK and Telefonica UK (O2) will be entering into a new infrastructure-sharing relationship ahead of the much-anticipated 5G rollout.
The duo already has an existing relationship for shared infrastructure activities, managed through the Cornerstone Telecommunications Infrastructure Limited (CTIL) joint venture, with this extension to include 5G at joint radio network sites. In theory, such a tie-up will allow the pair to accelerate 5G rollout plans over the coming months.
“We believe that these plans will generate significant benefits for our business and our customers as we move into the digital era of connected devices, appliances and systems on a mass scale,” said Nick Jeffery, CEO of Vodafone UK. “Customers will benefit from the best 5G experience available and we will deliver even faster speeds by using our spectrum holding more effectively.”
“I’m excited by the potential of these plans to meet the future needs of our customers while delivering value for our business,” said O2 CEO Mark Evans. “In addition, these plans would allow us to utilise the spectrum we acquired in the last auction very effectively.”
Looking at the 5G ambitions, both companies are being relatively coy with the specifics. Vodafone has confirmed it will launch commercial 5G services during 2019, exactly when is unknown though, while O2 has already stated it will not enter the fray until 2020. For Vodafone, some industry analysts have commented it is pitting itself in a race with EE, suggesting the launch would be at some point during early summer.
Perhaps this is an indicator of the importance of 5G scale. Being the first to market may not mean anything in the long-run, it’s a gimmick to include in advertising more than anything else, but nationwide deployment will be critical. O2 has a marketing leading position to protect, while Vodafone wants to recapture the fortunes of yesteryear. Clearly offering the 5G network with the widest coverage will be critical to winning subscribers once 5G vaults towards mass market adoption, and this partnership seems to have an eye on that.
As part of the agreement, more responsibilities will be devolved to the CTIL, allowing the JV to improve the efficiency of its operations and pursue opportunities to add further third-party tenants to the assets. The companies also intend to upgrade their transmission networks with higher capacity optical fibre cables, readying the infrastructure for low-latency use cases such as VR, while there is also an eye on future transmission operating model which could drive synergies for investment and operations.
Although trying to get telcos to play nicely with each other is a tricky task, the idea of shared infrastructure has been on Ofcom’s agenda for some time. It might create a bit of a red-tape maze in the first instances, though there are clear benefits to the concept.
“UK 5G roll-out is on the way and operators need to be more accepting of sharing infrastructure to ensure that coverage demands from consumers and businesses can be met as quickly as possible,” said Ingo Flomer, VP Technology at Cobham Wireless.
“Deploying new 5G networks typically require operators to install and maintain new antennas, hardware and cables, which requires significant planning, management and expense. By using one common architecture, operators can minimise cost and disruption.”
Fears the highly dense urban areas will be favoured over rural regions will certainly not be dismissed following this announcement as the cities are still much more attractive commercially, but with such partnerships the delay might not be as painful. A digital divide was created by the slow rollout of 4G, but shared-infrastructure relationships should ease this chasm, at least theoretically.
Debt-riddled French telco conglomerate Altice has raised some much-needed cash by selling stakes in two of its tower holdings to private equity.
The the total cash consideration is €2.5 billion, with KKR getting half the French towers business, while three quarters of the Portuguese towers business are being snapped up by Morgan Stanley and Horizon. There is much talk of what a good deal this is and how it will enable the relevant bits of Altice to focus on their core stuff, but this is all about eating into its massive debt pile in a bid to repair the catastrophic damage it experienced last year.
“I am enthusiastic about creating new tower partnerships in France and Portugal,” said Altice founder Patrick Drahi. “With KKR, Morgan Stanley Infrastructure Partners and Horizon Equity Partners, we have found long-term partners of the highest-quality who share our vision to invest in leading infrastructure and growth opportunities.
“We will create a leading European tower business, including the number one in France. Both tower businesses will be uniquely positioned to grow as they provide increasingly important infrastructure services to operators in both markets. Simultaneously, these transactions underline our commitment to delever and proactively manage our balance sheet while highlighting the significant underlying value of Altice Europe’s business.”
If Drahi hoped this move alone would have a profound effect on Altice’s share price he must feel pretty disappointed as it has been met with a distinct shrug. The French tower joint venture is called SFR TowerCo, but Altice stock is far more sensitive to the fortunes of the SFR telecoms business than a few towers, and that remains a challenge. You can read further analysis of the move at Light Reading here.
Telkom Kenya has announced it has reached a definitive agreement to sell up to 723 towers to American Tower, expanding the latter’s footprint to a fifth country in Africa.
The transaction, which will be completed in the second-half of 2018, will give the telco a bit of breathing room and cash to invest in its 4G network. Kenya Telkom has been performing adequately to date, though has struggled to get anywhere near market leader Safricom. It is hoped the funds will give the telco a boost to be more competitive.
“We are excited to announce the launch of operations in Kenya through our agreement to acquire TKL’s towers,” said William Hess, American Tower’s President of EMEA and Latin America. “This represents American Tower’s 17th market globally, and our fifth in Africa, and we look forward to helping expand the reach of mobile broadband throughout the country. Kenya is a very attractive market, and we have high expectations for its long-term growth potential.”
“Telkom will now focus on its core function – the provision of quality telecommunications services to our customers,” said Aldo Mareuse, CEO of Telkom Kenya. “In addition, the sale will release capital for further investment in our 4G network and a number of state of the art IT platforms, all of which will further enhance services for our customers as they demand higher quality and speed from our mobile data networks as well as a richer range of services.”
American Tower is one company which has been on the acquisition trail recently, seemingly capitalizing on strong financial performance. Aside from this deal, American Tower has also acquired the tower business units of both Idea and Vodafone in India, as the pair gear up to tackle the disruption caused by Reliance Jio in the market. Praying on struggling telcos’ assets seems to be a successful strategy here, as it spent $673 million to acquire nearly 10,600 sites over the first three months of 2018.
Looking at the financial side of the business, American Tower recently reported its figures with the first quarter demonstrating a 7.8% year-on-year increase to $1.742 billion, though it has lowered forecasts for the year, citing the troublesome Indian market and other factors.
The team will also be keeping an eye on developments with Sprint and T-Mobile, with the pair accounting for 4% and 3% (respectively) of American Tower’s consolidated property revenues. While there is still three to four years left on non-cancellable lease agreements, and the team anticipate aggressive spending to catch up to the top tier, consolidation of two major customers generally doesn’t bode well for the supplier.
Whether there is any acquisition left in American Tower remains to be seen, though the team has stated it is continuing to review and act on expansion opportunities in international markets. It does not seem to be shy about living by the ‘speculate to accumulate’ mantra.
Malaysian telco Axiata, via its subsidiary Edotco, is buying the tower business of the largest Pakistani operator Jazz.
The deal involves a whole bunch of holding companies and subsidiaries. Axiata’s tower subsidiary Edotco is technically doing the buying via its Pakistani subsidiary Tanzanite, while Jazz is actually selling its wholly-owned tower company, Deodar. Jazz was formed from the merger of Mobilink and Warid and is co-owned by Veon and Global Telecom Holding. The acquisition is being done in partnership with Pakistani investment group Dawood Hercules. Clear enough?
“We are pleased to be able to consolidate our expansion into Pakistan with this acquisition,” said Suresh Sidhu, CEO of Edotco. “The acquisition of Deodar is a critical part of our growth strategy and ambition to position Edotco as the leading independent telecommunications infrastructure services provider in Asia.”
“This transaction is highly value accretive for Veon and GTH and a further execution of Veon’s asset light strategy,” said Jean-Yves Charlier, CEO of Veon. “It also reflects the start of a long-term partnership with a strong counterparty with significant experience in tower management.”
The $940 million deal is expected to close later this year and the 13,000 sites apparently elevate Edotco to eighth place among the world’s top tower companies. It will presumably then change Jazz to use the towers so this seems to be a classic sell-and-lease-back deal.