Orange chief ‘open-minded’ to creating European mobile towers champion

French telecoms group Orange has raised the possibility of teaming up with rivals to forge a pan-European mobile towers champion, the latest sign of the dealmaking fervour sweeping a historically unfashionable part of the industry.

Chief executive Stéphane Richard said he was “open-minded” about the future of the carrier’s towers business, which analysts value at about €10bn and is already being split off into a separate company in an attempt to unlock the value of the masts.

Carving out the towers business will help Orange “see what game we want to play”, Mr Richard told the Financial Times. Pairing Orange’s 59,000 towers with those of Vodafone or Deutsche Telekom would be an “interesting opportunity” in the future, although the possibility is not currently under discussion, he added.

The future of mobile towers, the metal structures on which radio antennas sit, has become a hot subject for European carriers, which face pressure to finance investment in 5G networks or cut large debt piles. At the same time, infrastructure funds and specialist tower groups, led by Spain’s Cellnex, have raced to buy up towers in recent years.

Since it was founded in 2015, Barcelona-based Cellnex has been on an aggressive acquisition spree, buying masts from companies including the UK’s Arqiva, Portugal’s NOS, Switzerland’s Sunrise and France’s Iliad to build a business with a market capitalisation of €26.4bn.

Addressing the future of Orange’s towers, which are in Europe, Africa and the Middle East, Mr Richard said that “there is something smarter to do than just selling your towers to Cellnex”. However, he acknowledged there was “an amazing gap in valuations” between towers companies like Cellnex and telecoms operators, forcing the latter to adapt.

Orange has been slow to act, Mr Richard admitted, but said the group will define its strategy for the towers business when it reports full-year results in February. The lacklustre performance of European telecom stocks this year has only added to the pressure to carve out and sell tower assets.

As operators including France’s Altice, Ireland’s eir and Sunrise have sold thousands of towers, it is Cellnex that has written the biggest cheques. In July, the group issued new shares to raise €4bn for acquisitions, and last week agreed a €10bn deal for the towers owned by CK Hutchison’s Three networks in Europe. BT, which jointly owns a mast company with CK Hutchison in the UK, is also reviewing its options about whether to sell that business.

Not all operators have been willing to cash in, considering ownership of the towers as too important. Deutsche Telekom has created a separate tower company within its business called Deutsche Funkturm, while Vodafone has gone a step further with a plan to float a minority stake in its masts business in Frankfurt early next year.

Vodafone declined to comment. Deutsche Telekom did not respond to a request for comment.

Beyond its towers business, Orange is also weighing up options for further consolidation in Europe. This month, it acquired Deutsche Telekom’s majority stake in a fixed line business in Romania for €497m to combine it with its mobile business in the country.

Mr Richard named Belgium and Spain as countries where future deals may happen, adding that he believes there will be further consolidation in Spain, where smaller player MásMóvil was in June acquired by a trio of private equity firms in a €5bn takeover.

After a bruising year for telecom shares, Mr Richard sounded a note of optimism, echoing recent — and more confident — outlooks from Deutsche Telekom and BT. After cutting the dividend in the spring as the coronavirus pandemic gathered pace, Mr Richard said that the payout could be restored to pre-pandemic levels, possibly by the end of this year. The group’s share price is up nearly 20 per cent since the start of October.

Last week, the group announced it had received a favourable ruling in a long running tax dispute with the French government that will allow it to recover around €2.2bn.

Source link

Related Articles

Back to top button