Breakingviews - Gatecrashers join Europe’s telecom tower M&A bash

Different types of 4G, 5G and data radio relay antennas for mobile phone networks are pictured on a relay mast operated by Vodafone in Berlin, Germany April 8, 2019.

LONDON (Reuters Breakingviews) - Cellnex Telecom’s freedom to roam across Europe may be coming to an end. Spurred by the telecommunication tower operator’s rise, Vodafone is preparing to float its mobile mast unit early next year. Other European rivals are also carving out their infrastructure divisions. With half of Europe’s 700,000 mobile towers still potentially up for grabs, the 25 billion euro Spanish M&A machine faces serious competition.

Since listing in 2015, the Barcelona-based firm which specialises in the seemingly humdrum business of installing and maintaining transmitters for mobile phone networks has been on an extraordinary shareholder-funded buying spree. The 10 billion euro purchase of 24,600 towers from Hong Kong’s CK Hutchison, announced last week, confirmed its position as the continent’s leading operator, with a projected 103,000 sites by 2028. Investors, especially the pension funds eager to lock in stable long-term cash flows, appear happy to keep footing the bill. Cellnex shares have trebled in the last two years.

But all good things eventually come to an end. Cellnex’s enterprise value, which is now a whopping 21 times next year’s expected EBITDA of 1.2 billion euros, has lured others into the game. If valued at the same multiple, Vodafone’s Vantage Towers, which will have 68,000 masts when it lists in Frankfurt in the spring, would be worth over 14 billion euros. France’s Orange, Telefonica of Spain, and Germany’s Deutsche Telekom are also separating out their infrastructure units.

This should make Cellnex Chief Executive Tobias Martinez wary. Smaller mobile operators across Europe are still sitting on 350,000 mobile masts, according to consultancy TowerXchange. Telekom Austria, Sweden’s Telia, and Norway’s Telenor are already carving out portfolios that may attract interest from multiple buyers. One of Vantage’s stated ambitions is to expand by hoovering up other operators’ “non-core” assets.

Cellnex still has the advantage of independence, meaning it can add extra tenants to an existing mast without facing accusations it is favouring its own equipment. That’s something Vantage can’t do while under Vodafone’s wing. But the extra competition could drive up prices. Each of Hutchison’s towers, for instance, cost 35% more than a similar deal a year before. Martinez’s M&A party should brace itself for some gatecrashers.


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