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9 January 2020

Towerco M&A fever continues as Cellnex expands into Portugal

The later months of 2019 saw feverish activity in the cell towers market, with more operators looking to offload their passive infrastructure into joint ventures or to independent towercos. The new year began with some new transactions – Cellnex continued on the acquisition spree that has made it the biggest pure-play tower operator in Europe, and Telefónica made a sale of assets in Ecuador as part of its dual strategy of offloading more sites, and defocusing on Latin America (except Brazil).

Spanish towerco Cellnex, which dubs itself the ‘American Tower of Europe’, has spent more than €6.4bn ($7.16bn) since April on entering or expanding in seven countries. It has now added Portugal to its footprint, which already includes Spain, Italy, The Netherlands, France, Switzerland, the UK and Ireland.

Cellnex is paying €800m ($895m) for the Portuguese tower and sites operator Omtel, buying it from its previous owners, a group made up of Altice Europe (25% stake) and the Belmont Infra Holdings consortium. Omtel operates about 1,800 towers and 1,200 rooftop sites, or about 25% of Portugal’s total mobile locations, and plans to build 400 more over the next four years as operators look to densify their networks to support 5G services. Most of the new sites are likely to be rooftops and poles, plus some rural towers, but Cellnex has also been active in developing a small cell business, especially in Spain, where it has a partnership with billboard owner JC Decaux.

The company said that 5G will “require network densification and an efficient roll-out that should allow a neutral and independent operator like Cellnex to propose an attractive solution to mobile operators both in terms of cost and speed of execution”.

Omtel’s main customer is MEO, the Portuguese operator owned by Altice. The two have agreed a long term leasing deal and 350 of the new sites will be built to meet MEO’s specific requirements (reflecting the towerco industry trend towards ‘build to suit’ models to enhance value for key tenants.

Other acquisitions made by Cellnex over the past eight months include:

  • May 2019: a €1.4bn ($1.57bn) deal to create a new company that owns and manages Iliad’s 5,700 mobile sites in France, with an agreement to build up to 2,500 additional sites across the country. Cellnex owns a 70% stake in that new company, with Iliad retaining a 30% stake.
  • May 2019: outright acquisition of Iliad’s 2,200 sites in Italy for €600m ($671m), with a plan to build up to 1,000 additional sites.
  • May 2019: a €700m ($783m) purchase of a 90% stake in a Swiss towerco, which runs 2,800 sites for MNO Salt. This included a deal to build up to 500 more sites.
  • June 2019: a £100m (€117m/$131m) deal to operate 220 towers for BT Group across the UK for the next 20 years, billed as a “first step towards potential future industrial cooperation between the two companies”.
  • September 2019: the €210m ($235m) acquisition of Cignal, a pure-play towerco in Ireland with more than 540 sites. Includes plans for 600 more sites over six years.
  • October 2019: the £2bn (€2.35bn/$2.63bn) acquisition of the telecoms division of UK infrastructure operator Arqiva, a deal which makes Cellnex the largest owner of UK cell towers. This includes 7,400 UK sites and the right to market another 900 sites as well as concessions to use street infrastructure for small cells in 14 London boroughs.
  • December 2019: a €260m deal to buy 1,500 telecom sites from Orange Spain for €260m.

This was not Cellnex’s first year of acquisitions. In 2017 it bought 2,000 sites from Swiss operator Sunrise for $514m and signed a $921m ‘buy and build’ deal covering 3,000 sites with Bouygues Telecom in France.

As of the end of September 2019, Cellnex had a total of 27,698 operative sites (8,684 in Spain, 8,336 in Italy, 5,260 in Switzerland, 3,343 in France, 919 in the Netherlands, 608 in the UK, and 548 in Ireland) plus 1,777 DAS and small cell nodes. But once all the acquisitions close, and the agreed new sites have been built, it aims to have a footprint of 58,000 sites, excluding small cells.

Last year, the company announced nine-month revenues of €753m ($842m), EBITDA of €498m ($557m) and operating profit of €131m ($147m) for the three quarters to the end of September. About 67% of those revenues come mobile operators’ tower rentals, while it also provides indoor small cell-as-a-service, broadcast infrastructure and smart city infrastructure offerings, and runs emergency service networks.

Cellnex says the Omtel deal will add about €90m ($101m) to its annual EBITDA once it is fully integrated and the planned new sites are built.

“With Omtel, we are not only integrating one of the leading independent telecommunications infrastructure operators in Portugal. We are also committing to consistent growth in Europe, incorporating an eighth market – which naturally extends the current geographical coverage of the seven countries in which we already operate, and in this case especially due to the proximity and operational synergies that may arise with the Group in Spain,” said Cellnex CEO Tobias Martínez in a statement to investors.

Meanwhile, Phoenix Tower International (PTI) has agreed a ‘purchase, sale and master lease’ agreement with Telefónica for 1,408 towers in Ecuador and 621 in Colombia.

CEO Dagan Kasavana commented: “These transactions are exciting for PTI and will allows us to become the market leader in Ecuador, a US dollar-based market with three healthy wireless operators with significant 4G build-out needs in the coming years. The transaction in Colombia solidifies PTI’s strong market position with over 1,800 owned towers. Colombia has been a great market for PTI, and we see continued growth from all of the carriers in the coming years.”

After these transactions close, PTI will own and operate over 7,000 towers across Latin America. A year ago, it acquired Syscom Telecom, adding 80,000 US small cell sites to its portfolio and helping to make it the largest privately owned towerco in the Americas with over 8,000 towers, 986 kilometers of fiber and over 80,000 other wireless infrastructure and related sites in 14 countries across the Americas and Europe.