It’s all go in the telecoms towers space, with two remarkably similar deals worth billions of dollars coming on both sides of the planet.
Telstra has offloaded 49% of its towers business to an investment consortium for A$2.8 billion, while Telia Company announced the sale of an identically-sized stake in its towers operations in Finland and Norway in a deal that should bring it cash proceeds of €722 million.
First up Telstra, because we have been waiting longer for that deal.
The Australian incumbent shared plans to seek a minority investor in its towers business in November last year as part of a broader restructuring; at that point it renamed the unit InfraCo Towers. Since then it has periodically declared its towers monetisation plan to be ‘on track’, with a view to bringing in an investor in the second half of the year. Now it is making good on that pledge.
It is selling almost half of the business to a group of funds comprising the Future Fund, Commonwealth Superannuation Corporation and Sunsuper via a A$2.8 billion (just over US$2 billion) deal that values the business – and its 8,200 Australian towers – at $5.9 billion, or 28x EBITDAaL.
“Telstra’s objective in seeking a strategic partner has been to maximise overall value for our shareholders, maintain control of the assets and agree terms that secure Telstra’s mobile network leadership and competitive differentiation into the future,” said the telco’s chief executive Andrew Penn, echoing the aims of many major international telcos that have sought to bring in some cash for their infrastructure assets without actually giving up control.
“I am pleased that we have been able to achieve that ahead of schedule through this transaction announced today,” he added.
Now, a telco hitting a target ahead of schedule, particularly when we’re talking one more day before the second half of the calendar year, is not normally something worth noting. However, in this case there is an interesting little snippet of information that explains
the early mark.
“We were approached by the consortium earlier in the year as they recognised the value of these assets and provided a compelling rationale to progress the transaction ahead of schedule. We believe the value of the transaction; the high calibre consortium members and the terms of the agreement which protect Telstra’s network differentiation, support our decision to accelerate the process,” Penn said.
That comment is great news for telcos still in the process of deciding when and how to monetise their passive infrastructure. The market is still so hot that investors are the ones making overtures to the telcos. That 28x earnings multiple is not to be sneezed at either; its around what Telefonica got for its Telxius portfolio earlier this year and more than Vodafone made in the Vantage Towers IPO.
Telia Company did not disclose who approached whom in its towers sale to investors, but it too is looking at an earnings multiple in the high-20s.
The Swedish company has agreed to sell a 49% holding in its Finnish and Norwegian towers business to asset managers Brookfield and Alecta in a deal that values the whole of the unit, with its 4,700 towers, at €1.52 billion (US$1.8 billion); that’s an EBITDA multiple of 27x.
Telia earmarked the Finland/Norway business for disposal earlier this year when it created Telia Asset Management, a new business unit to house passive infrastructure. Telia chief executive Allison Kirkby made much the same comments back then as she did in announcing the new investors.
“We are delighted to enter into a strategic partnership with Brookfield and Alecta, to both crystallize immediate value, and more importantly help Telia better develop its infrastructure base,” Kirkby said. “Both Telia and Brookfield/Alecta have a long-term industrial view on the role of tower infrastructure as a foundation for continued digitalization of the region.”
The Finland/Norway unit accounts for just part of Telia’s towers business in the Nordic and Baltic markets, where it claims a total of 25,000 towers and rooftop sites. The company has not been wholly clear on whether further disposals will follow, although given the current state of the market, it would be unwise to rule it out.
And whether Telia is the seller or another major telecoms player, it’s pretty clear that there will be further deals in the global infrastructure space. The trend is far from over.
