Telefonica has announced that it is selling its towerco subsidiary Telxius to American Tower Corporation for EUR7.7 billion in cash. The agreement incorporates 30,722 telecommunication tower sites.
The Telxius tower business generated an estimated EUR190 million in the last year, which yields a multiple for the sale of approximately 30.5. The sale is part of Telfonica’s stated aims to reduce its debt, which will decrease by EUR4.6 billion as a result.
The President of Telefónica, José María Álvarez-Pallete, said that the deal made “strategic sense within our roadmap” and added that “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”. Last year the company outlined its objectives as boosting opportunities with the greatest growth potential, leveraging the value of its infrastructure, increasing agility, improving efficiency, and creating long-term value through operational excellence.
Following this transaction, American Tower will become Telefónica’s leading supplier in both Europe and Latin America and maintain its status as a partner in strategic projects in Brazil, Argentina and Colombia.
Telxius was 50.01% held by Telefónica Infra. The management team of which will continue to focus on the development and monetisation of towers, distributed antenna systems, data centres, greenfield fibre projects and submarine cables.
The European towers sector was previously dominated by MNO owned companies but has been rapidly consolidating with NOS and CK Hutchison selling their towers to Cellnex, and Vodafone preparing to float its towerco Vantage. The FT reports that Telefonica held talks with Cellnex about buying Telxius, but Cellnex was “outgunned” by American Tower.
Third-party tower ownership allows MNOs to liquidate CAPEX and use this to reduce debt or invest in high-growth areas, but it also offers some efficiency advantages, as third-party towercos support higher levels of shared infrastructure. In Telefonica’s case the debt reduction is still a drop in the ocean for a company whose debt has continued to hover around $100 billion, although this is almost 50% lower than 2011’s record debt levels of $145 billion.