Sunday, July 28, 2019

Vodafone to create Europe's largest TowerCo

Vodafone Group Plc will spin off most of its European tower infrastructure into a new, fully independent "TowerCo" company.

TowerCo, which will be operational by May 2020, will comprise 61,700 towers in 10 markets with potential proportionate EBITDA of around  EUR 900 million.

Vodafone has recently announced active and passive network sharing agreements in Italy, Spain and the UK.

Vodafone said it believes that there is significant scope to generate operational efficiencies and increase tenancy ratios across the portfolio by creating an independent company. Based on market benchmarks for anchor tenant lease rates, existing third party revenues and the attributable cost base, TowerCo could generate proportionate annual revenue and EBITDA of around €1,700 million and €900 million, respectively. TowerCo’s attributable annual maintenance and expansion capex could be up to €200 million.

A future IPO for the new organization is a possibility.

Nick Read, CEO of Vodafone, said “Building on our position as Europe’s largest converged operator, we are now creating Europe’s largest tower company. Given the scale and quality of our infrastructure, we believe there is a substantial opportunity to unlock value for shareholders while capturing the significant industrial benefits of network sharing for the digital society. We are focussed on executing this strategic priority over the next 18 months."

Separately, Vodafone and Telecom Italia Group (TIM) agreed to an active network sharing partnership for 4G and 5G and the expansion of their existing passive sharing agreement. Specifically, Vodafone will merge its passive tower infrastructure in Italy ("Vodafone Italy Towers”) into INWIT SpA. As part of the combination, Vodafone will receive a cash consideration of EUR 2,140 million and a 37.5% shareholding in the combined entity, which will remain listed on the Milan Stock Exchange. Based on the 30-day VWAP of the INWIT share price prior to this announcement, Vodafone's shareholding would be valued at EUR 3,130 million, which implies an enterprise value for Vodafone Italy Towers of EUR 5,270 million.

Orange and Vodafone extend network sharing in Spain for 5G

Vodafone and Orange agreed to extend their current active mobile network sharing arrangement in Spain to include 5G. The original network sharing agreement signed in 2006 covered passive infrastructure nationwide and active infrastructure in smaller towns. The agreement was subsequently renewed in 2012 and in 2016.

Under the new agreement, Vodafone will be able to offer its customers broadband access and other fixed services on Orange’s fibre-to-the-home (FTTH) network. Both companies have also agreed to explore potential co-investment opportunities to expand their fibre footprint in the future. The partnership is also expanded to include 5G. The terms of the new agreement allow active network sharing (including both the radio access network and high-speed backhaul) in cities with populations of up to 175,000 people, whereas the previous arrangement only enabled sharing in towns of between 1,000 and 25,000 people. Two thirds of the Spanish population will now be covered by Vodafone and Orange’s shared network agreement, with 14,800 sites expected to be shared vs. 5,600 shared today. The new agreement is expected to deliver cumulative opex and capex savings to Vodafone of at least €600 million over the next ten years.

Vodafone and Orange will continue to operate independent infrastructure in the biggest cities.

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