Deutsche Telekom Weighs Tower Tie-Up With Vodafone, Orange
Deutsche Telekom Weighs Tower Tie-Up With Vodafone, Orange
(Bloomberg) -- Deutsche Telekom AG is weighing a potential merger of its mobile towers with those of rivals including Vodafone Group Plc and Orange SA, according to people familiar with the matter, in a move that could create a European behemoth in the sector.
The German carrier, which has a market value of 83.4 billion euros ($92.9 billion), has held preliminary discussions with both operators, the people said, as it conducts a review to increase the value of its towers portfolio. Deutsche Telekom is working with advisers to explore options including a sale, listing or strategic partnership for the assets.
Spain’s Cellnex Telecom SA would also be interested in combining its tower assets with Deutsche Telekom’s, the people said, asking not to be identified discussing confidential information. The Barcelona-based company has been building its European towers portfolio via a string of acquisitions in recent years and has already struck a deal with Deutsche Telekom in the Netherlands.
Any deal Deutsche Telekom pursues with a rival carrier could create a dominant European tower operator and a potent challenger to Cellnex, which has been growing rapidly through acquisitions. The German carrier’s tower portfolio already included 58,000 sites as of last year, according to a May corporate presentation.
Pan-European Network
“While a combination between any of the players is likely and could even be a three-way transaction, we believe the most likely scenario would be a merger of DT’s towers with Vantage Towers, as this would seem to unlock the highest level of synergy,” James Ratzer, an analyst at New Street Research LLP, wrote in a note to clients Thursday.
Deutsche Telekom shares were up 3.2% at the close Thursday in Frankfurt. Shares of Vodafone and Orange jumped as much as 3.4%.
Deliberations are ongoing and Deutsche Telekom could still pursue an alternative to a merger of its towers business, the people said. Representatives for Cellnex, Deutsche Telekom, Orange and Vodafone declined to comment.
Valuable Infrastructure
Europe’s struggling phone carriers once saw ownership of these network infrastructure assets as a vital part of their business models. Now, under pressure to raise cash and cut the bill for new network investments, they’ve begun to spin off their wireless masts into separate units or sell them outright.
Last March, U.K.-listed Vodafone raised about 2 billion euros in an initial public offering of its Vantage Towers unit. It picked Frankfurt as a venue for the IPO because of the high share of assets from Germany in Vantage’s portfolio. That raises the prospect of any tie-up between Deutsche Telekom’s towers and Vantage facing regulatory hurdles in the country, according to the people.
In France, Orange’s outgoing Chief Executive Officer Stephane Richard has called on Europe’s carriers to look at combining their tower operations as an alternative to full-scale tie-ups that risk of being blocked by European regulators. He said last year he was open to such a deal as a way to compete with Cellnex, which has snapped up infrastructure assets from CK Hutchison Holdings Ltd. and Patrick Drahi’s Altice Europe NV in the last 18 months.
Meanwhile, American Tower Corp. made its first major foray into Europe a year ago with a deal for Telefonica SA’s tower sites in Spain, Germany, Brazil, Peru, Chile and Argentina.
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