Vodafone to spin out masts into separate business

Vodafone Mast

Vodafone has announced it will create a separate European mast company, which it says will be operational by May 2020.

The new organisation, to be known as TowerCo, will comprise 61,700 towers in 10 countries, with “a potential EBITDA of around €900 million”.

Having secured network sharing agreements in several key markets, Newbury-based Vodafone Group Plc is proceeding with plans to monetise a substantial proportion of its European tower infrastructure during the next 18 months.

Vodafone has recently announced active and passive network sharing agreements in Italy, Spain and the UK, and will continue to pursue similar arrangements across its European footprint to capture the sizeable industrial benefits prior to monetisation of its tower infrastructure.

These sharing agreements ensure that Vodafone can benefit from a faster roll out of 5G technology across a wider geographic area at a lower cost and are expected to deliver substantial annual recurring savings in operating and capital expenditure.

The announcement comes after Vodafone revealing last November that it had begun a review of its European tower portfolio with a view to improving asset utilisation.

Vodafone believes that there is significant scope to generate operational efficiencies and increase tenancy ratios across the portfolio, and that it will be possible to monetise towers while preserving network differentiation and long-term strategic flexibility.

During the course of this process, Vodafone received several offers for various parts of its tower portfolio, highlighting the potential of an attractive valuation of its tower assets.

TowerCo will own Europe’s largest tower portfolio, comprising approximately 61,700 towers across 10 countries1, with 75% of these sites in the major markets of Germany, Italy, Spain and the UK. 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.

Vodafone intends to monetise a substantial proportion of TowerCo over the next 18 months, depending on market conditions. This could include an IPO or disposal of a minority stake in TowerCo, as well as potential disposals of minority or majority stakes at an individual country level.

Proceeds from the sale programme will be used to reduce the Group’s debt.

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.”

Total towers comprise 19,300 in Germany, 11,000 in Italy, 9,700 in Spain (adjusted for the sharing deal with Orange), 6,600 in the UK (representing 50% of total UK towers, consistent with Vodafone’s ownership of Cornerstone, the 50:50 joint venture company that owns and manages its passive infrastructure) and 15,100 in Other Europe (excluding VodafoneZiggo).