Vodafone analyzing European tower separation, CEO says
13 SEP 2018
Vodafone [LON:VOD] is evaluating whether separating its European tower portfolio from its operating business makes sense, though there are challenges to that model, group CEO-designate Nick Read said.
Speaking at the Goldman Sachs Communacopia Conference in New York today (13 September), Read cautioned that there is no active plan today to pursue such a deal, but said that “this is something that’s definitely on our list of things” that the company is considering.
Read referred to his experience with the formation of Indus Towers in India, where he sat on the board for five years. Indus is a joint venture operating towers for carriers including Vodafone India. While outlining the range of benefits that Vodafone derived from the formation of Indus, Read cautioned that, if the company had instead chosen to simply sell the towers to a private equity firm, it would “have regretted” the separation.
Turning to the European market, Read said that the traditional problem with structuring a tower deal is that infrastructure firms and sponsors in the past only wanted to acquire 100% of a tower portfolio. However, Read said that he has seen that, over the last 18 months, tower operators and sponsors have become more flexible and “more appreciative of the strategic challenges” in a deal, and are therefore “more open” to different structures.
Among the “strategic challenges”, Read explained that some of Vodafone’s towers are key to their network differentiation and future deployment of equipment that will make 5G possible. Additionally, while Vodafone’s cost of financing is around 2.5% in Europe, tower companies are financing at around 5%, Read said.
This news service previously reported that a divestiture of Vodafone’s European towers could be a value additive option after Elliott Management built a stake in the company. Elliott’s intentions remain unclear.
Speaking at the Goldman Sachs Communacopia Conference in New York today (13 September), Read cautioned that there is no active plan today to pursue such a deal, but said that “this is something that’s definitely on our list of things” that the company is considering.
Read referred to his experience with the formation of Indus Towers in India, where he sat on the board for five years. Indus is a joint venture operating towers for carriers including Vodafone India. While outlining the range of benefits that Vodafone derived from the formation of Indus, Read cautioned that, if the company had instead chosen to simply sell the towers to a private equity firm, it would “have regretted” the separation.
Turning to the European market, Read said that the traditional problem with structuring a tower deal is that infrastructure firms and sponsors in the past only wanted to acquire 100% of a tower portfolio. However, Read said that he has seen that, over the last 18 months, tower operators and sponsors have become more flexible and “more appreciative of the strategic challenges” in a deal, and are therefore “more open” to different structures.
Among the “strategic challenges”, Read explained that some of Vodafone’s towers are key to their network differentiation and future deployment of equipment that will make 5G possible. Additionally, while Vodafone’s cost of financing is around 2.5% in Europe, tower companies are financing at around 5%, Read said.
This news service previously reported that a divestiture of Vodafone’s European towers could be a value additive option after Elliott Management built a stake in the company. Elliott’s intentions remain unclear.