Cellnex Telecom is to buy Arqiva’s telecoms unit for £2bn in a deal the Spanish company said would make it the largest independent tower company in the UK.
The sale is the latest in a series of global tower deals across the world as telecoms companies look to offload their masts to infrastructure funds and specialist companies. It is also likely to herald further tower consolidation in the UK.
Vodafone and O2 have appointed banks to formally launch the sale of a stake in CTIL, their jointly owned British mast company, according to a person with direct knowledge of the situation. UBS is advising Vodafone while Goldman Sachs is advising O2’s owner Telefónica. Talks with potential investors and trade buyers have taken place.
CTIL, with 16,500 masts, is the UK’s leading mast company with about a third of the market.
The Arqiva deal adds about 8,000 UK sites to Cellnex’s portfolio, taking its total to 53,000 across Europe. This year it bought BT’s rooftop masts.
Cellnex, which has launched a €2.5bn rights issue, plans to fund the acquisition through a £2bn syndicated loan facility and available cash reserves, the company said on Tuesday. Adjusted earnings before interest, tax, depreciation and amortisation are expected to be about £170m next year.
Towers have become a sought-after asset in recent years, attracting much higher valuations than the operating arms of telecoms companies. That has led many, including Vodafone, to separate out their masts in order to sell them.
Cellnex, which has been one of the most acquisitive companies in the region, said it was still evaluating €7bn worth of opportunities.
The Arqiva telecoms masts were acquired at a lower valuation than similar recent transactions. Citi calculated that Cellnex had paid €240,000 per site compared with €316,000 when it acquired masts from Iliad. Megabuyte, the research company, said it was “perplexing” that the deal was struck at barely half Cellnex’s own trading valuation.
Arqiva, which traces its roots back to its role running the BBC’s transmitters, will retain its large broadcast towers business. The Winchester-based company was seen as a potential consolidator of tower assets itself but has been burdened by debts built up under private equity ownership. It will use the proceeds of the sale to halve its debt.
The sale comes two years after Arqiva’s owners pulled their plans to list, which at the time would have valued it at £4.5bn excluding debt. The flotation was abandoned partly because of Arqiva’s leverage. The company refinanced, cut costs and sold off some assets, including its WiFi business, before launching a review of its structure earlier this year.
“The majority of proceeds from the sale will be used to reduce debt, thereby providing a solid financial base for Arqiva and its shareholders to invest in the future of the UK’s terrestrial TV and radio platforms as well as its data networks and capability,” said Simon Beresford-Wylie, Arqiva chief executive.
Tobías Martínez, his counterpart at Cellnex, said: “The Arqiva telecoms division acquisition is a key milestone for Cellnex. Its strong UK asset base, revenues and financial profile, combined with its long history at the heart of UK digital infrastructure, make it a perfect addition to our operations.”
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