Deutsche Telekom [ETR:DTE] received an eye-watering EUR 10bn for a 51% stake in its tower company in July, capturing the imagination of dealmakers looking for the next mega-deal in telecoms, media and technology (TMT).
The stake sale in the German incumbent’s tower company GD Towers to Brookfield Infrastructure Partners [NYSE:BAM] and Digital Bridge [NYSE:DBRG] was the largest telecom towers-related deal in the last two years. It contributed to EUR 14.8bn worth of deals in the year to date, Dealogic data shows.
The stake sale is the latest of a flurry of Europe’s mobile operators separating tower infrastructure units – towercos –with a view of bringing in investors. Tower activity was responsible for roughly 10% of the value of all TMT activity in the year to date and around a third of the value of all telecom deals, per Dealogic.
Some operators prefer full exits. Last year saw the EUR 7.7bn sale of Telefonica’s [BME:TEF] tower business Telxius to American Tower [NYSE:AMT], while Altice [AMS:ATCB] sold its French tower company Hivory to Cellnex [BME:CLNX] for EUR 5.2bn.
Infrastructure investors who had previously fought to acquire a stake in GD Towers are now circling the next best opportunity in Europe. Infrastructure investors KKR [NYSE:KKR], EQT and Global Infrastructure Partners (GIP) are all among the investors considering an investment in Vodafone’s [LON:VOD] listed towers vehicle Vantage Towers [ETR:VTWR].
And more opportunities for investors to invest in telecom assets are expected to emerge as European operators begin preparations for separating tower infrastructure into new entities. Telenor [OSL:TEL] has begun preparations to carve out and eventually monetize its tower portfolio for next year. Cornerstone, the tower business owned by Telefonica, Liberty Global [NASDAQ:LBTYA] and Vantage Towers is another tower asset that could offer a ripe opportunity for investors.
While infrastructure funds continue to try to get in on the action, further down the line, Europe’s operators could consider deeper consolidation moves in the wake of rising CAPEX costs and increased mobile network usage.
Vantage Tower has been rumoured to be mulling larger strategic tie-ups with larger towercos including Orange’s [EPA:ORA] tower company TOTEM and Deutsche Telekom's GD Towers. Vodafone is still thought to be considering the combination of its mobile masks with CK Hutchison [HKG:0001] owned Three UK. Meanwhile, players like Cellnex prefer fully independent towers businesses, rather than playing second fiddle in incumbent-led vehicles.
Whether or not European regulators will bite for bigger consolidation is still an open question. In the meantime, though, infrastructure funds will continue to have operators on speed dial as they look for the next towerco mega-deal.