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Good news looms for Vodafone, as Telefonica offloads towers

Inside Telecom Staff

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Spanish telco Telefonica agreed on Wednesday to sell its tower portfolio in both the European and Latin American markets to American Tower for €7.7 billion (or $9.4 billion).

Telefonica will offload almost 30,722 existing communications sites pertaining to its telecom infrastructure subsidiary, Telxius Towers across Brazil, Chile, Peru, Argentina, Germany, and Spain.

American Tower is a leading independent owner, operator, and developer of multitenant communications real estate with a portfolio of over 183,000 communications sites.

The statement issued by the Spanish incumbent said that American Tower will now become Telefonica’s leading supplier in both Europe and Latin America, maintaining its status as a partner in strategic projects in Brazil, Argentina, and Colombia.

“After this great operation we will continue to focus on our most ambitious objectives: the integration of O2 with Virgin in the United Kingdom, the purchase of Oi mobile in Brazil and the reduction of debt,” said Telefónica chief executive José María Álvarez-Pallete, in a statement.

The deal comes at a time where the Spanish telco scrambles to reduce its staggering debt over the past few years, prompting the company sell off non-core assets in Central America.

Reports say that most of its other Latin American business are also on the chopping block.

This isn’t the first time the company has monetized on its tower assets, as it has offloaded numerous sites in Latin America, while selling off shares of Telxius to several private investors that include KKR; as it stands, Telefonica Infra owns 50.1 percent of the business.

Telefónica’s net financial debt, excluding lease liabilities, stood at €36.7 billion at the end of September 2020, down by just over €2 billion from the end of 2019.

But its debt-to-earnings ratio was slightly higher at 2.77x.

Earlier last year, O2 UK and Virgin Media had agreed to merge, with the deal currently being reviewed by the Competition and Markets Authority (CMA).

It is worth mentioning that the three-way Oi deal– which will see Telefónica, America Movil and TIM acquire the Brazilian telco’s mobile assets – was announced in December 2020.

The significant purchasing price of the sites will allow the company to make sizeable gains, as it estimates its capital gain from the deal at around €3.5 billion.

“Once the transaction is complete, the Telefónica Group’s net financial debt will be reduced by approximately €4.6 billion and the leverage ratio (Net Debt/OIBDAaL) by approximately 0.3 times,” the statement read.

Telxius generated an estimated OIBDAaL (operating income before depreciation and amortization, after leases) of €190 million over the past 12 months, Telefónica said.

When adjusting the numbers to highlight the full impact of its German asset transfer made back in June 2020, then the Telxius price tag will imply 30.5 times multiple of pro forma OBIDAaL.

This could translate into positive news for competitor Vodafone which is striving to float its infrastructure subsidiary, Vantage Tower in Germany later this year.

The €7.7 billion Telxius price tag has pushed analysts to predict high teens to low 20s of billions of euros for Vantage Tower.

Vantage Towers generated pro forma EBITDAaL of €742 million last year, including contributions from its Italian and UK towers. While its earnings metric is not directly comparable to Telefónica’s OIBDAaL, it gives an insight onto the sum of the acquisition; 30 times EBITDAaL would value Vantage Towers at €22 billion.

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Telecoms

Deutsche Telekom suggests upcoming towers partnership

Karim Hussami

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Deutsche Telekom suggests upcoming towers partnership

“Because everybody does something, this is exactly why I’m not doing it,” Tim Hoettges, Chief Executive Officer of Deutsche Telekom said, referring to the current trend of telecoms operators selling off tower assets for sizeable sums of money. “It might be right that you have to monetise your towers to deleverage your balance sheet… [but] we don’t need that today,” he said.

Deutsche Telekom will not part with its tower assets, despite recently reaching` a deal of that nature in the Netherlands, but it could look to float its passive infrastructure business or seek out a tower partnership.

Orange CEO Stéphane Richard recently named Deutsche Telekom as an ideal partner in the towers space; while the telco wants to retain control of its own towers, that could mean co-control with another big operator, Richard explained.

There were no formal talks happening with Deutsche Telekom – or Vodafone, Orange’s other perfect partner – when the CEO made the revelation.

Deustche Telekom appears to be following a similar strategy to Orange.

“It always takes two to tango,” said Hoettges, speaking at the German incumbent’s 2020 results call on Friday. “We might have a partner, where we have synergies and a value-enhancing story,” he said, a comment that doubtless caught the attention of executives at the operator’s French peer.

Passive infrastructure assets

Telefonica is one of the big names selling off towers, and it was honest about the fact that debt reduction was one of the main drivers of the €7.7 billion deal it inked with American Tower in January.

But for Deutsche Telekom, towers and their growing value are a strategic asset, “not just selling something and getting the money,” as Hoettges put it.

The operator brokered a deal for towers partnership in January, to combine its towers in the Netherlands with those of Cellnex and simultaneously create a fund in partnership with the towers firm to invest in passive infrastructure assets.

“This is a classic DT deal. We create optionalities for value-enhancing businesses outside…of our strategic envelope,” he said.

Benefits of towers partnership

As for the benefits that comes out of sharing networks, they include: the increase in the speed of opening new fields and enables the subscribers to provide network coverage to wide areas in a faster way with lower CapEx potential.

Operators also have chance to satisfy their customers with the quicker network coverage, as well as operators will start making money as of the first day by removing the field installing process.

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Telecoms

MTN faces rocky situation in Syria, hampering Middle East exit

Inside Telecom Staff

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MTN faces rocky situation in Syria, hampering Middle East exit

South African operator MTN is facing a rocky situation in Syria, as the company was placed under a judicial guardianship following a court battle that went in favor of the country’s telecoms regulator.

The Syrian Telecommunications and Post Regulatory Authority had previously accused the provider of mismanagement and violations of its licensing contract. According to Reuters, the state had claimed that the alleged violations deprived it of revenue, while MTN denied the allegations and said last week that it intended to appeal.

The regulator filed a lawsuit against the South African courier before the administrative court of Damascus seeking interim measures against MTN’s Syrian operations. The move cripples the company’s exit from the Syrian market, as it was reportedly hoping to settle a deal worth $65 million, amounting to 75 percent of MTN’s Syrian unit, Reuters reported.

It is worth mentioning that the administrative court of Damascus appointed MTN Syria minority shareholder Tele Invest as its guardian, which was primarily tapped to become the buyer of the Group’s 75 percent stake in its Syrian office.

The judicial guardian is responsible for managing its day-to-day operations.

The sale to TeleInvest is meant to be part of MTN Group’s plan to exit the Middle East, corresponding with its new strategy to focus on its core African markets in the medium-term future.

MTN Group highlighted in a statement late last week that it “strongly disagrees with the allegations made before the court” — which have yet to be made known — as well as the decision and intends to file an appeal. In addition, the group is also considering other appropriate steps to take in light of the ruling.

According to the provider, in the six months to June 2020, MTN Syria contributed 0.7 percent to the group’s reported earnings before interest, tax, depreciation and amortization. At that time, the net assets attributable to MTN Syria in the MTN Group accounts had been written down to the estimated recoverable amount of $80 million.

Reuters had also reported that MTN’s operations in the Middle East have been the center of wide controversy, with allegations over its use of bribes to win a 15-year operating license in Iran, while, in parallel, aiding militant groups in Afghanistan; MTN, however, denies all the allegations.

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Telecoms

STL signs record high $100 million deals across MEA

Inside Telecom Staff

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STL

India-based digital network integrator Sterlite Technologies (STL) announced on Monday that it has renewed and extended deals with leading telecoms providers in the Middle East and Africa region (MEA).

According to a company statement, the deals are worth more than $100 million, taking STL’s order book to a record high, while exhibiting the company’s unwavering focus on building future-ready digital networks within the region.

“STL is building solutions to empower its customers in the MEA region for optical connectivity and network software, enabling FTTH and 5G deployments.  We are proud to be a part of the progress of the Middle East and Africa. With our deep technology expertise and growing talent base, we will continue to deliver on the full potential of digital networks, providing enhanced experiences to consumers and businesses alike,” speaking on the deals, Sandeep Girotra, Global Sales Head, STL, said in a statement.

The global pandemic has pushed many telcos to heavily invest in building digital networks to be able to meet the rising demand for connectivity from people remaining indoors due to lockdown measures. STL has capitalized on this and expanded its presence in the region with their fully 5G ready Opticonn and Software Solutions.

“Our unique end-to-end solutions enables customers to build 5G hyperscale networks at a fast pace with lower long-term Total Cost of Ownership (TCO). These multi-years, multi-million-dollar deals range from optical connectivity solutions to network solutions,” the company said.

According to STL, one of the large-scale deals has been signed with a leading telco in the UAE to advance its 5G, 4G and FTTX network infrastructure through STL’s Opticonn Solutions, including onshore logistics and warehousing. Another multi-million-dollar digital transformation partnership has been formed with the leading telecommunications group in North Africa.

The unnamed telco will deploy STL’s digital billing solutions to 7 million subscribers across the region.

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