Last year saw European tower infrastructure hitting what may prove to be the peak of its valuation, surpassing the values assigned to active networks or many other telco assets by the financial markets. That was one factor in the race, by many European telcos, to carve out their tower operations and unlock value to be harnessed for other activities, or to reduce debt. But the valuations may already be on the slide.
When Vodafone group CEO Nick Read announced the carve-out of his company’s European towers – now Vantage Towers – in July 2019, he said they could be worth as much as 20 times their annual earnings, which would have equated to about $21.4bn in a portfolio of 61,700 sites.
Vantage now has 82,000 European sites, but the price range for its initial public offering (IPO) is between $13.6bn and $17.5bn, so considerably less than envisaged less than two years ago.
This is partly because earnings are not as high as Read had expected – he had estimated $1.1bn a year, but the pro forma figure for 2020 is about $883m. And of course, that is down to factors such as the pandemic that were not visible when he announced the carve-out plan. The share price of Cellnex, Europe’s largest independent towerco, has fallen from a peak of $65.62 in October 2020 to $49.63 this month. Similar patterns have been seen at American Tower and Crown Castle in the USA.
So perhaps the bubble has burst a little, but this is still a very healthy market, and some factors are Vodafone-specific. The recent sale of Telefónica’s Telxius towerco for $92bn valued that company at about 26 times earnings, while the $24.2bn market cap of Cellnex suggests that its 75,000 sites are worth an average of $321,765 each, according to Light Reading, well ahead of the figure of $214,114 for Vantage, assuming an IPO at the high end of the price range.
Vodafone has already announced two anchor investors in the Vantage IPO – Digital Colony, an infrastructure investor, has agreed to spend €500m ($595m) on shares, and Singapore-based equity fund RRJ will invest €450m ($535m.