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Tower Talk: a guide to the latest major cell site developments

7 Feb 2017

State-owned full-service provider Saudi Telecom Company (STC) has signed an agreement to purchase a number of telecom towers from ISP Etihad Atheeb (GO) for SAR230 million (USD61.3 million). GO provides broadband services over several platforms, including WiMAX, time division duplex LTE (TD-LTE) and fibre (FTTx). The quantity of towers to be included in the transaction was not disclosed, and the deal is subject to regulatory approvals. For its part, STC has stated that it will finance the acquisition from its internal resources, adding that it ‘would not result in any material impact on the Company’s financial results nor any other financial obligations on the company’. In a subsequent statement, meanwhile, STC’s CEO Khaled Biyari told Bloomberg that the agreement would not change the operator’s strategy and the provider was still in talks with rival Etihad Etisalat (Mobily) regarding the establishment of a tower management company.

Spanish mobile infrastructure firm Cellnex has signed an agreement with French full-service provider Bouygues Telecom that will add 3,000 towers to the operator’s portfolio in France. The deal comprises two phases, the first of which will see Cellnex acquire 1,800 towers from Bouygues over the next two years for a total investment of EUR500 million (USD539 million). Under the second stage of the agreement, Cellnex will construct an additional 1,200 new sites, at a cost of approximately EUR354 million, over a five-year period. Further, as Bouygues will be the anchor tenant on the sites, the pair have signed a Master Service Agreement for an initial duration of 15 years, but extendable for an additional 15 years. Commenting on the deal, Cellnex’s CEO said: ‘The incorporation, in 2017 and 2018, of a significant number of operational sites and the commitment to integrate a second package as they come on stream by 2022, positions Cellnex in France as an infrastructure operator with an attractive size and coverage to accompany the current and future rollout of technologies and equipment for mobile broadband access providers – particularly 5G’.

South Africa-based MTN Group will exchange its 51% interest in Nigeria Tower InterCo, the parent company of Nigerian tower operator INT Towers, for an additional shareholding in IHS Group, the last-named company has announced. As a result of the transaction, MTN’s economic interest in IHS will increase from approximately 15% to approximately 29%. There are no conditions precedent to the transaction and it is expected to close once the new shares in IHS Group have been issued during Q1 2017. The transaction will enable MTN to simplify its tower ownership structure as well as diversify its tower infrastructure exposure across the IHS Group, which operates in five countries across Africa.

Responding to speculation regarding the potential sale of its telecom tower portfolio, Swiss full-service provider Sunrise has confirmed in a statement that it is ‘in the preliminary stages of considering a possible disposal of the larger part of its passive tower infrastructure, potentially supporting a faster deleveraging of the company.’ The operator went on to state that there was no certainty of a sale, saying that assessing options for its passive infrastructure ‘to focus on strategic network management, network development and the delivery of new technologies’ is just one possible opportunity.

US-based passive infrastructure group American Tower Corporation (ATC) is reportedly leading the pack for the acquisition of Idea Cellular’s towerco subsidiary, the Economic Times reports. Bids for 100% of Idea Cellular Infrastructure Services, which operates 9,722 towers, have ratcheted up to INR45 billion (USD669.5 million), following interest from private equity firms Blackstone and Carlyle.

Talks on the sale of a 41% stake and management control of Bharti Airtel’s tower division Bharti Infratel have been complicated by the sudden drop in the latter’s share price last week, leading to disagreements over its valuation. The Economic Times writes that Airtel rejected a bid of INR340 per share from the prospective buyers, a consortium comprising US private equity group KKR and Canada Pension Plan Investment Board (CPPIB). The announcement of a potential merger between India’s second and third-placed cellcos Vodafone India and Idea Cellular late last month led to a 17% drop in the Infratel’s share price, as a tie-up would significantly impact the demand for tower sites nationwide. At the time of the consortium’s offer, Infratel’s share price had dropped to around INR304.6, and the paper cites executives familiar with the matter as saying that Airtel considered the premium on the bid insufficient for relinquishing management control of the towerco.

In the UK, meanwhile, the Telegraph writes that bidding for Britain’s largest independent telecom and broadcasting tower operator Arqiva is set to begin shortly. Current owners Macquarie and CPPIB are asking for between GBP5 billion (USD6.2 billion) and GBP6 billion for the firm, which has a monopoly on the UK’s terrestrial TV broadcasting towers and operates around 8,000 telecom tower sites. According to the paper’s sources, Arqiva was forced to move away from its previous plan of an initial public offering (IPO) due to complications surrounding its GBP3 billion debt.

US passive infrastructure provider Crown Castle has reported its results for the year ended 31 December 2016, registering net revenue of USD3.92 billion for the twelve-month period – an increase of 7.0% year-on-year. Turnover from site rentals grew 7.1% y-o-y to USD3.23 billion, including USD2.83 billion from towers (USD2.73 billion in 2015) and USD402.6 million from small cells (USD284.4 million in 2015). Net profit for the year was down to USD357.0 million from USD1.5 billion due to the inclusion of income from discontinued operations totalling USD999.0 million in 2015. Consequently, Crown Castle reported adjusted EBITDA of USD2.2 billion for 2016, up from USD2.1 billion a year earlier. Commenting on the results, the operator’s CFO Dan Schlanger noted: ‘In addition to generating strong results during 2016, we also enhanced our leading portfolio of wireless infrastructure with the acquisition of Tower Development Corporation and continued expansion of our small cell footprint, including announcing the acquisition of FiberNet and completing the integration of *Sunesys*’.

Mumbai-based towerco GTL Infrastructure, which operates around 28,000 towers across India, booked turnover of INR2.63 billion for the three months ended 31 December 2016, up slightly from the INR2.51 billion figure it reported in the corresponding period of 2015, but down from INR2.64 billion on a quarter-on-quarter basis. An increase in the operator’s foreign exchange losses, however, saw the operator’s net loss for the period widen year-on-year to INR1.14 billion from INR1.01 billion. In its report, GTL warned that it may be liable to additional taxation on its tower sites following a Supreme Court ruling in December 2016, which upheld that mobile towers are buildings and therefore subject to property tax. An appeal is pending with the apex court, and where the company has received demand notices for tax, it has filed petitions in the appropriate courts. GTL stressed, however, that it had not received such demands for the majority of its sites, and that in many cases, the tax would be recovered from its customers, rather than GTL itself.

Infrastrutture Wireless Italiane (INWIT), the mobile infrastructure arm of Telecom Italia (TI), has reported its preliminary results for the full year 2016, claiming a 4.6% increase in annual revenue to EUR333.5 million. EBITDA meanwhile, grew to EUR163.6 million (up 13.4% y-o-y compared to its 2015 pro-forma figures), with an EBITDA margin of 49.1%. INWIT attributed the improvement to ‘the increase in the number of tenants on sites and a reduction in space leasing costs.’ The operator also sketched out elements of its 2017-2019 business plan, including the deployment of 500 new sites, the development of more than 4,000 micro-cells in areas with high density of users and traffic, and the rollout of 1,000 fibre connections to support anticipated demand for high speed backhaul, all targeted for completion by the end of 2018.

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