telecommunications
Radio tower sale: Telekom waving billions in revenue
The Telekom logo on the roof of the company headquarters in Bonn. Photo: Federico Gambarini/dpa
© dpa-infocom GmbH
There are tens of thousands of mobile phone masts and rooftop locations in Germany, a large part of which belongs to Deutsche Telekom. But the Bonn group is now withdrawing from this business and bringing North American financial investors on board.
With the sale of the majority of its radio tower business to investors from North America, Deutsche Telekom intends to cash in heavily.
The Bonn-based group announced that it would sell 51 percent of its previous business to Brookfield Asset Management from Canada and Digital Bridge from the USA. Telekom wants to keep 49 percent. As part of the transaction, the Funkturm business is reportedly valued at €17.5 billion excluding debt and cash. It’s about 40,000 mobile sites, of which around 33,000 are in Germany and 7,000 in Austria.
Telekom remains on board as a tenant – so there will also be magenta antennas at the locations in the future. The branch with around 800 employees recently had an annual turnover of 1.1 billion euros, the operating result (Ebitda AL) was 640 million euros. In Germany, the business runs under the company name Deutsche Funkturm GmbH, which is based in Münster.
10.7 billion euros revenue
According to the information, the financial debt of Deutsche Telekom will decrease by 10.7 billion euros with the income. With a view to fears of recession in the economy and the prospect of billions in revenue for Magenta, Telekom boss Tim Höttges said: “It’s good to be winterproof.” In addition, management held out the prospect of using part of the proceeds to increase its stake in the lucrative American subsidiary T-Mobile US.
The other two German mobile network operators have already taken the step that Telekom is now taking. The majority of the Telefónica Deutschland (O2) radio towers belong to the US company American Tower, only a small part is still owned by O2. Vodafone took its Funkturm subsidiary Vantage Towers public last year. As the majority shareholder, which owns around 82 percent of the share capital, Vodafone still has the say.
When presenting the deal with the North American investors, Telekom boss Tim Höttges reported that talks had also been held with Vodafone. He was optimistic that the antitrust authorities would have approved such a merger. However, a corresponding investigation by the competition authorities would have taken 12 to 15 months, said the manager and made it clear that they would not have wanted to wait that long.
Why financial investors now?
The Spanish radio tower group Cellnex was also in the running, but was unable to assert itself. Why financial investors now? Telekom boss Höttges emphasized the advantages of financially powerful partners. “These guys have deep pockets for the next steps.” Telekom expects the authorities to give the green light in the next few months and that the sale will be completed by the end of this year.
The radio tower companies own the so-called passive infrastructure – i.e. the concrete and metal structures on which the antennas hang. The antennas, in turn, belong to the network operators.
In the Internet age, cell towers are a reliable business with promising growth. Digital Bridge boss Marc Ganzi spoke of a bright prospect: “We are seeing strong organic growth driven by increasing demand for mobile data, connectivity and coverage.”
In the business model of the niche industry, a “tower company” concludes long-term leases with mobile network operators, in Germany these have so far been Telekom, Vodafone and O2. A fourth network operator, 1&1, will soon be added. It used to be common for only one network operator’s antennas to be attached to a mast. In the meantime, however, the telecommunications industry is working more closely together, and antennas from several network operators are increasingly hanging from one mast.