European telcos take advantage of the towers in the face of the high costs of 5G

 European telecommunications groups are capitalizing on the power of towers to make money, at a time when infrastructure companies in the sector compete to shell out billions of dollars to buy some antennas through which more and more data passes before the arrival of 5G.

Against a backdrop of dwindling revenues and persistent debt accumulated during the last network upgrade, telcos are enjoying the quick cash injections they can get from the sale of their tower portfolios, or potential future revenues. of splits of these divisions.

The improvement of the networks, which includes the renovation of the towers, to adapt them to the new 5G technology – which promises an era of self-driving cars and remote neurosurgery – will concentrate some 890,000 million dollars between 2020 and 2025, according to the sector body GSMA.

European operators are increasingly willing to mine assets to help finance this renewal. While selling towers outright makes them a lot of money, many operators are also looking to create separate tower units or launch joint ventures with independent companies as a way of keeping a piece of future growth potential.

So far this year, Vodafone (LON: VOD ) has prepared its tower business for the sector’s biggest IPO in Europe since 2014, while Orange (PA: ORAN ) has created a separate tower unit.

Independent tower companies have shown an interest in shopping around, acquiring more than €14 billion ($16.9 billion) in assets so far this year to tap into the steady inflation-linked returns generated by towers with antennas.

However, around 66% of sites in Europe remain wholly or partially owned by phone companies, according to estimates by Barclays (LON: BARC ), compared with less than 10% in the United States.

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“The market is opening up,” says Julian Plumstead, chief executive officer for Europe at American Tower, which bought more than 30,000 towers from Spain’s Telefonica (MC: TEF ) in January.

Making a comparison with the situation in the United States, Plumstead told Reuters: “We are still in the early to mid-stage of our industrial development, but going forward I think the trend will continue and possibly accelerate.”


In cases where operators and tower companies have joined together in joint ventures, the tower companies say they often have the option to buy assets from the operators after several years.

This means that some are gradually giving up these valuable trophies. Telefónica obtained more than 9,000 million dollars with the sale to American Tower of sites that it had already dissociated into a separate unit in 2016.

“We fully understand the interest of operators in betting on this two-phase approach,” Cellnex (MC: CLNX ) deputy CEO Àlex Mestre told Reuters. “There is a revaluation of the asset … and operators can take advantage of it.”

Plumstead said that this year American Tower had managed to grow its portfolio in Europe from an admittedly small base despite restrictions on movement.

“Getting people on the ground hasn’t been that easy…but we’ve built more towers this year in Europe than we did last year and we plan to do the same again this year.”

Towers are prized assets, in part because the contracts to use them are like an “infinite marriage” in which operators pay stable rates for decades, in the words of one industry expert.

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Both American Tower and Cellnex shares hit all-time highs last year during the pandemic, having respectively doubled and tripled in value over the last half decade.


Until now, operations have been concentrated in Western Europe, but regional leader Cellnex and American Tower, whose purchase from Telefónica multiplied its presence on the continent by seven, are now looking to the East and Scandinavia.

“We are looking for a broader geographical scope,” said Cellnex’s Mestre. “We have also started in the Nordic countries, we have started in Poland and in all those areas of our main geographies where we believe that there are still many towers to outsource.”

Last week, Cellnex added another milestone to its aggressive growth plan with the purchase of 99.99% of Polkomtel Infrastrukture, which meant the acquisition of 7,000 telecommunications sites in Poland.

Almost all European operators are now debating what to do with their telecom tower portfolios, industry executives say.

The high multiples paid for the recent operations have aroused their interest. According to Moody’s analysts, American Tower paid Telefónica about 30 times the most recent net profit of its tower division for the assets.

Operators willing to part with their towers have achieved average valuations 22.1 times the return on their assets since mid-2018, according to Moody’s. Cellnex achieved the lowest price among recent operations, paying a multiple of 16 times the profit for a portfolio of the Polish Play last October.

“If you come to the conclusion that it’s not really a competitive advantage to own the towers, then you have to get rid of them because multiple arbitrage is high,” said Nikos Stathopoulos, president of mobile operator United Group, which owns 6,000 towers in Bulgaria. , Slovenia and Croatia.

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Sweden’s Telia (ST: TELIA ) is also considering cashing out its more than 9,000 towers by partnering with outside investors, a spokeswoman told Reuters, while Telenor (LON) is also looking to build value from its tower portfolio, she said. a representative.

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