LONDON, UK: HICL Infrastructure Plc has exchanged contracts to acquire a 40% equity interest in Aotearoa Towers Limited, a passive mobile tower infrastructure owner, from Vodafone New Zealand Limited.

Following completion of the transaction, Aotearoa Towers will represent approximately 7% of HICL’s portfolio, by value and is expected to take HICL’s portfolio weighting in digital communications infrastructure to c. 9%, a bourse filing said.

The Transaction, a carve-out of Vodafone NZ’s passive mobile tower infrastructure, will create New Zealand’s largest independent tower company, with 1,484 wholly owned towers covering 98% of New Zealand’s population.

Aotearoa Towers will own and operate the passive tower infrastructure (e.g. towers, masts, poles), with Vodafone NZ retaining responsibility for the ‘active’ telecommunications equipment mounted on the towers. Mobile towers are critical infrastructure that underpin mobile connectivity and wireless broadband across New Zealand.

Aotearoa Towers will benefit from a long-term, availability-based revenue contract with Vodafone NZ, that is indexed to inflation. The initial term of the agreement is 20 years with the option of two 10-year extensions.

The agreement will grant Vodafone NZ access to the passive tower infrastructure in exchange for contractual, inflation-linked access charge payments that are unrelated to usage, and will account for 96% of Towers’ day-1 revenues. Vodafone NZ has contractually committed to additional sites over the next ten years which will increase Towers’ asset base and revenues over this period.

This is a strategic and highly attractive digital infrastructure acquisition for HICL. Aotearoa Towers cashflows are underpinned by a long-term contract with a strong corporate counterparty and Aotearoa Towers benefits from an entrenched market position with high barriers to entry.

The Transaction is expected to be accretive to several of HICL’s key portfolio metrics, particularly asset life due to the perpetual nature of the asset, and inflation correlation, which is materially in excess of HICL’s portfolio average.

InfraRed has been investing in, and managing, assets in Australia and New Zealand since 2009 and has operated a regional office in Sydney since 2013. This investment is the third investment in New Zealand from InfraRed-managed funds. The Investment Manager was supported on the acquisition of TowerCo by Russell Stanners, as a senior adviser. Russell was previously the CEO of Vodafone NZ for 12 years to 2018.

HICL’s investment is being made alongside Northleaf Capital Partners, which is also indirectly acquiring a 40% equity interest in Aotearoa Towers.

Infratil Limited, an existing shareholder of Vodafone NZ, will retain an indirect equity interest of 20% in Aotearoa. Northleaf Capital Partners, through its funds, is also a long-term shareholder in the Northwest Parkway toll road (USA) alongside HICL.

Completion of the Transaction is subject to Overseas Investment Office approval and is anticipated to occur in the second half of 2022. The investment will be funded from the proceeds of HICL’s recently completed capital raise and existing credit facilities.

Edward Hunt, Head of Core Income Funds at InfraRed said: “InfraRed is delighted to be investing on behalf of HICL in the largest independent tower company in New Zealand and commencing this long-term relationship with Vodafone NZ.

This acquisition further executes on HICL’s vision to connect communities by providing essential communications infrastructure. The entrenched market positioning of the asset, combined with the long-term, contracted revenues generated under a CPI-linked contract, are a key attraction of this core infrastructure asset of the modern economy.”

Vodafone New Zealand is one of New Zealand’s leading connectivity companies offering a range of broadband, mobile and technology products across almost three million connections to consumer, business and public sector customers. Vodafone New Zealand is owned by Infratil and Brookfield Asset Management and is a strategic partner to the Vodafone Group, one of the world’s largest telecommunications companies.