As demand for faster digital networks grows, European mobile operators look to profit from tower sales.
European mobile operators are currently selling the passive parts of their networks, the towers where equipment is attached, The Wall Street Journal reports. The decision comes as there are concerns that 5G’s arrival will mirror 4G in terms of a lack of financial benefits. Companies that built 4G networks invested significantly in stronger signals, but mobile operators have had trouble charging customers for downloading additional data.
The disconnect has led to operators preparing full or partial network sales. For example, Vodafone raised funds in 2014 for selling its stake in Verizon and is now in the process of close a minority initial public offering (IPO) to its Vantage Towers unit at a market value of approximately $15 billion, according to sources. The company currently shares some towers with other operators, but wants to share more. That’s partly because providing connections becomes less expensive when multiple carriers agree to hang gear on a common structure. Sharing will be more critical as 5G deployment picks up because a bigger investment will be required along with a denser web of transmitters than 4G currently has.
These types of deals could lead to industrial consolidation, permitting significant cost savings within the mobile industry. Unfortunately, mergers like the T-Mobile-Sprint deal are not happening in Europe out of concern that prices will be raised. Tower deals have not faced as much rejection, however.
Meanwhile, Vantage is looking to purchase more towers from operators that are seeking more cash, such as Vodafone. Cellnex Telecom has provided the model that Vantage is looking to duplicate; Cellnex has agreed to acquire approximately $18 billion worth of towers from companies that Hong Kong billionaire Li Ka-shing and Franco-Israeli tycoon Patrick Drahi control, according to The Wall Street Journal.
Carriers could cash in on “tower party”
A financial motivation for wireless carriers to sell also exists. Investors are fans of infrastructure providers’ low-risk revenue profile and the potential games from tower sharing. Vodafone giving up a minority stake of its business has shown a way for companies to find hidden value without giving up strategic control.
Meanwhile, tower sales aren’t new to wireless carriers AT&T and Verizon who have been selling them to specialist real estate investment trusts (REITs) like American Tower, SBA and Crown Castle. There’s also a chance that 5G will benefit the U.S. sector given the slowing investment in Europe, even if there’s less potential for gains through deals. The slowing investment in Europe has not scared off American Tower however—it agreed to pay $9.4 billion for a tower portfolio that Spanish business Teleonica controlled. For anyone looking to invest in the 5G deployment, towers might be the safest, most direct play.
Joe Dyton can be reached at email@example.com.