Deutsche Telekom has agreed to sell a majority stake in its towers business to Brookfield Asset Management and private equity group DigitalBridge Group, as a growing number of telecoms companies seek to monetise infrastructure assets.
The sale of 51 per cent of GD Towers to the consortium values the business at €17.5bn and comes after the European towers group Cellnex pulled out of the running.
Robert Grindle, an analyst at Deutsche Bank, said Brookfield and DigitalBridge were “key players in European tower infrastructure — they are known names and very ambitious”.
He added: “There’s now much more competition for a small number of assets and towers valuations have moved up while telco valuations have moved down.”
Deutsche Telekom chief executive Tim Höttges said in a statement that the sale created value for shareholders. “At the same time, the deal allows us to . . . benefit from further value upside of the towers business through our retained 49 per cent stake.”
Some telecoms groups have sold off all of their towers business — the tall metal structures used for mobile and other antennas — to acquisitive groups such as Cellnex and Blackstone’s Phoenix Tower International.
Others, including Deutsche Telekom, Vodafone and Orange, have retained part ownership. Orange has formed a separate unit called Totem, while Vodafone has spun out its business into Vantage Towers. They are now looking to merge or sell stakes in these assets, which will allow them to keep a stake in the profitable business, while also moving debt off their balance sheet.
The Deutsche Telekom deal is expected to close by the end of the year, and the group estimates cash proceeds of €10.7bn, which it will use to cut its debt and embark on increasing its stake in T-Mobile US to 50.1 per cent, the company said on Thursday.
“This is not a synergy-releasing industrial deal for its “kingmaker” asset, but it does free the towers from parent leverage constraints and thus creates a “currency” for potential future consolidation,” wrote analysts at Jefferies.
The company’s share price fell more than 2 per cent in early morning trading, to €18.73.
GD Towers operates more than 40,000 sites in Germany and Austria and generated €1.1bn in revenues in 2021, as well as adjusted earnings before interest, tax and depreciation of €640mn.
GD Towers operates 40,000 sites in Germany and Austria and employs about 800 staff. In Deutsche Telekom’s most recent results in May, the towers business posted first-quarter revenues of €284mn.
“The partnership being formed today is about building the next-generation digital infrastructure champion of Europe,” said Marc Ganzi, DigitalBridge chief executive.