Orange prepares carve-out of mobile towers
Move to capitalise on investor interest could boost group’s value by more than €10bn
Orange is preparing to split its mobile towers into a separate company, capitalising on investor interest in telecoms infrastructure in a move that could boost the French group’s valuation by more than €10bn.
The state-backed operator will update the market on its plans at an investor day on December 4, said people familiar with the matter. One of them said it had decided to proceed but the board had yet to ratify a specific plan.
Stéphane Richard, chief executive, in May said strong investor interest in tower and fibre assets showed the “intrinsic value of telecoms networks”, and that Orange was considering ways to maximise the value of its networks assets.
Ramon Fernandez, chief financial officer, on Thursday told investors at a conference that Orange had one of the biggest portfolios of mobile towers in Europe, and invited them to the upcoming investor event to learn more.
“In terms of physical assets, we’re not far from being No. 1,” he said, according to comments published by Bloomberg. “I don’t want to be too specific because you’re all welcome to Paris on December 4.”
Carving out the masts into an independent company could pave the way for a potentially lucrative stake sale to a tower specialist such as Spain’s Cellnex or infrastructure or private equity funds.
While carriers from the US to India and Africa have sold the “passive” parts of their networks to sector specialists, European telecoms companies have historically been wary of selling their towers. But the lack of growth in the region’s telecoms sector has depressed valuations and the cash requirements of investing in new fibre and 5G networks has led to a steady stream of deals.
Vodafone and Deutsche Telekom have split towers from their core operations. France has been a very active market for tower consolidation after Orange rivals Bouygues, Iliad and Altice sold masts in recent years.
Altice’s €1.8bn sale of a 49 per cent stake in its French tower company to KKR in 2018 — a deal struck at 18 times earnings before interest, tax, depreciation and amortisation — proved a catalyst for further deals.
Tim Höttges, chief executive of Deutsche Telekom, said this week he was open to a flotation of its Deutsche Funkturm towers business or a partnership but was not looking to simply sell out as some smaller European networks have.
Orange has 59,000 towers across Europe, Africa and the Middle East. It shares towers with Vodafone in Spain and Deutsche Telekom in Poland. Its 15,000 towers in France are likely to be among the most prized, according to Morgan Stanley, because they are in prime urban locations where data consumption is highest.
The towers generate earnings before interest, tax, depreciation and amortisation of €600m a year and would be valued at between €8bn and €10.3bn based on recent deals in the sector, according to Morgan Stanley analyst Emmet Kelly.
Orange is expanding its French tower estate as part of an agreement with regulator Arcep to improve national coverage, and could add a further 5,000 sites within the next three years. It also has a number of rooftop antennas that could be sold.
However, one person familiar with the matter said the company was still hashing out which towers, real estate and other sites to include in the carve-out, adding that no decision had been taken on whether assets outside France would be included.
A spinout risks opposition from employee unions, where the towers are seen as the crown jewel in Orange’s assets. Some have called for the company to cut its dividend instead of selling assets to finance network investments.
Orange declined to comment.