Vodafone to create Europe’s largest tower company

LONDON: Having secured network sharing agreements in several key markets, Vodafone Group Plc announced Friday that it is proceeding with plans to monetise a substantial proportion of its European tower infrastructure during the next 18 months, including the previously announced intention to combine Vodafone Italy’s passive tower infrastructure with Inwit S.p.A.

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 in order 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 opex and capex.

In November 2018, Vodafone announced that it had commenced a review of its European tower portfolio with a view to improving asset utilisation. Since then, Vodafone has conducted extensive due diligence and evaluated the formation of a European tower company and the potential opportunities and risks associated with tower monetisation in all of its major European markets.

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 has received several offers for various parts of its tower portfolio, which have highlighted that its tower assets would command an attractive valuation, reflecting TowerCo’s superior asset quality, strong market positions and higher anchor tenant credit rating.

Consequently, Vodafone has decided to legally separate its passive tower assets in order to create a new TowerCo organisation with a dedicated management team, which will be operational by May 2020.

TowerCo will own Europe’s largest tower portfolio, comprising approximately 61,700 towers across 10 countries, 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.

TowerCo’s attributable annual maintenance and expansion capex could be up to €200 million. The ultimate financial profile of TowerCo may vary from these figures, depending on the assets that are included, whether the assets are fully controlled, and the anchor tenant lease rates that Vodafone decides to set.

Vodafone intends that TowerCo’s operational and financial KPIs will form part of its regular disclosure in the future.


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