CK Hutchison closes in on €10bn European tower sale to Cellnex

CK Hutchison is closing in on a sale of its large portfolio of mobile towers in Europe to Cellnex, the acquisitive Spanish telecoms infrastructure company, which would net the owner of the Three mobile brand €10bn if a deal is agreed.

The Hong Kong-based group carved out the assets, which comprise 29,100 sites across six European countries, in August and said at the time it was “actively exploring options” for the business.

Barcelona-based Cellnex was considered to be a likely candidate to acquire the masts, or a stake in the now separate and renamed CK Hutchison Networks, after it raised €4bn via the issue of new shares in July to pursue takeover opportunities.

On Wednesday CK Hutchison said it was in talks with Cellnex over a disposal that would depend on service agreements being struck with the Spanish company to accelerate the roll out of 5G networks.

CK Hutchison is the latest company to separate out its masts from its core telecoms operating business, with the former having attracted much higher valuations.

The plunge in share prices across the sector, combined with high levels of debt and the need to invest in 5G upgrades, has pushed some networks to sell their towers to specialists such as Cellnex or infrastructure investors such as KKR. Other companies, including Vodafone, are considering floating stakes in their infrastructure arms to crystallise value without losing control of the asset.

The sale of Three’s towers has been seen as a potential spur for further consolidation in the telecoms sector. CK Hutchison’s failed attempt to buy O2 in 2016 was complicated by its joint ownership of the MBNL tower joint venture in the UK alongside BT.

Cellnex shares rose 5 per cent after talks over a potential deal were confirmed and it reported strong results for the first nine months of the year. Revenue grew 53 per cent to €1.1bn while earnings before interest, tax, depreciation and amortisation, as well as one-off costs such as restructuring and bonus payments, rose 68 per cent, boosted by recent acquisitions. However, pre-tax losses in the period widened to €228m compared with losses of €166m a year earlier.

The Spanish company has spent €7bn on deals this year having bought towers in Portugal, Poland and the UK, funded by debt and equity.
It now owns 61,000 sites and has a market capitalisation of almost €28bn, nearly double that of Spanish incumbent telecoms company Telefónica.

Giles Thorne, an analyst with Jefferies, said the results helped justify the performance of the company’s stock. “Once again, Cellnex does much to justify its year-to-date share gains.”

Source: Financial Times