The infrastructure gold rush in Europe is not all about mobile sites to support 5G. Fiber and broadcast towers are also in the mix, and data centers are likely to play a greater role as the edge cloud expands too.
A new UK infrastructure investment vehicle, Cordiant Digital Infrastructure, has made its first two investments, one in a towerco in Czech Republic, and one in a fiber network in Norway. Together, the deals bring it 660 telecom and broadcast towers, 300 microwave links, 4,850 kilometers of fiber and six edge cloud data centers.
The investor is a new branch of well-established telco player Cordiant Capital, which set up the new fund to take advantage of the growth and expected long term returns in telecoms infrastructure. That business had an IPO on the London stock exchange in February, raising £370m.
The new company paid £451m (€522.23m) to buy České Radiokomunikace (CRA) and its mobile and TV towers from Australia’s Macquarie Asset Management. It sees potential in a towerco that has already extended its business beyond mobile sites and into support for enterprise and IoT services, and the edge cloud.
Cordiant said in a statement: “Growth opportunities for CRA exist in supporting the mobile operators with infrastructure as well as in expanding the size and reach of the data centre platforms. There is significant potential to expand CRA’s early, successful, network offerings in the Internet of Things. The network already offers smart metering for water, electricity and gas for companies including E.ON and RWE.”
The new fund also invested a smaller, but undisclosed, amount for an unnamed Norwegian fiber network plus land. The fiber links Norway to other Nordic and European countries and customers include utilities, enterprises and telcos. The buyer said about half of the fibers have been leased, so there is “significant potential to increase revenues with existing and new customers (such as data centre operators)”.
Some UK players are less attached to their infrastructure businesses. There are reports that Telefónica may sell its stake in its towers joint venture with Vodafone, Cornerstone as being non-strategic. Telefónica O2 UK is set to merge with Liberty Global’s Virgin Media, the UK’s largest cableco, while Vodafone has placed its 50% stake in Cornerstone in its Vantage Towers carve-out, which had its IPO this month.
A sale would unlock cash for Virgin/O2 to use for fiber expansion, which will be key to its convergence ambitions and bid to challenge the incumbent fixed/mobile telco, BT/EE. Mike Fries, CEO of Liberty Global, suggested that shares in Cornerstone would come into play for private equity investors, once the merger is finalized, probably in June.
Speaking during Liberty’s recent quarterly results call, Fries said Virgin and Telefónica will “sit down and look at” O2 UK’s 50% stake in Cornerstone once the deal closes, noting that a sale would raise funds to accelerate fiber roll-out, a central element of the merger proposition.
“Obviously we are in a position to, if we wanted to, monetise Cornerstone as a JV. You should assume that there’s a possibility we would look at that favorably,” he said. “So let’s wait for the transaction to close. It’s a decision we would likely make jointly with our partners Telefónica. But we are obviously in a position to monetize that if we felt it was appropriate and we either needed or wanted to get that capital out and do some of these strategic things.”
The bigger goal for VM–O2 is to create a “national fixed/mobile champion” to rival BT Group, while using a converged network to drive new revenues in retail, wholesale and B2B services. The aim is to add 7m homes to the current 2.6m passed by Virgin’s Gigabit fiber-to-the-home network, and other partners and investors will be enlisted to help.
Another Liberty Global unit, its VodafoneZiggo joint venture in The Netherlands, is also said to be considering a sale of its tower assets as non-strategic.