The past 12 months have seen a spate of activity across the European tower industry which has caused a significant shake-up of the landscape. Cellnex, Europe’s largest independent towerco announced six deals in 2019, acquiring 10,700 sites from Iliad/Salt in France, Italy and Switzerland, signing a collaboration agreement governing 220 BT high sites in the UK, reaching a deal to acquire Ireland’s Cignal and announcing the acquisition of Arqiva’s telecoms division. In early 2020, Cellnex entered the Portuguese market via the acquisition of OMTEL. Digital Colony has also been active on the M&A front, adding two businesses (iWireless Solutions and Spyder Facilities) and to its growing digital infrastructure platform, The Freshwave Group, plus further M&A activity has taken place in the UK with Brookfield’s acquisition of 3i’s stake in Wireless Infrastructure Group.
Europe’s MNOs have been busy too. In the past 6 months, four of the continent’s biggest operators have announced tower strategies which will have a transformational impact on the shape of the European tower industry. In June, Vodafone announced its intent to carve out up to 61,700 European towers, creating Europe’s largest towerco in the process. Whilst Vodafone is gearing up for a 2021 IPO of its towerco, the operator remains open to exploring different strategies, with Vodafone Italia having carved out and merged its Italian towers with TIM’s INWIT.
In August, CK Hutchison announced plans to carve it 28,500 European towers into their own captive towerco, CK Hutchison Networks, although plans to monetise the towerco do not appear to be an immediate priority. In September, Telefónica (who had already carved 18,000 CALA and European towers into their infraco Telxius) announced that it was to accelerate the monetisation of its remaining c. 50,000 sites, 19,000 of which are in Germany and 7,000 of which are tied up in the UK JV with Vodafone (Cornerstone). Plus in December, Orange announced plans to create towercos in France and Spain, hinting that this plan may be rolled out across other markets with a view to creating a pan-European towerco.
In Scandinavia, operators have also announced carve out plans, Telia is carving their Swedish, Norwegian and Finnish towers into Telia Towers, with each country set to operate their own P&L, whilst Telenor has carved out its 10,000 Norwegian towers into Telenor Infra.
As the rollout of 5G networks starts to gather pace, the industry is starting to see new business models, partnerships and M&A happening across the European landscape as towercos expand their service offerings to position themselves as an increasingly critical partner for the continent’s operators. From a growing number of partnerships with municipalities and venues to the acquisition of specialist businesses bringing expertise in indoor and outdoor coverage and edge computing; and from new site topologies and service offerings to operators to understanding how to manage the increasing levels of active sharing, the role of towercos in the European market is changing.
TowerXchange continues to keep our finger on the pulse of the dynamic and fast evolving European tower industry, with major developments hotly expected in 2020. The key actors in the sector will assemble on 19-20 May in Barcelona for the 5th Annual TowerXchange Meetup Europe, for more information please click here
Figure one (a): Tower counts of Europe’s towercos with >1,000 towers
Figure one (b): Tower counts of Europe’s towercos and JV infracos with <1,000 towers
Select country analyses
France
Total towers: 60,331
MNOs: Bouygues Telecom, Free (Iliad), Orange, SFR (Altice)
Towercos: ATC Europe, Cellnex, Hivory, TDF, TowerCast, Orange Towerco*
* in the process of being formed
Three of France’s four MNOs have completed tower sales in the country, whilst Orange has announced plans to carve their 17,100 sites into their own towerco. Whilst Orange’s plans to form a towerco are currently centred around France and Spain, the operator has hinted that they may roll out the plans across other operations to create a pan-European towerco in which they may look to monetise a minority stake.
Bouygues Telecom was one of Europe’s first MNOs to sell towers to an independent towerco, selling 2,166 of their estimated 17,000 towers to Antin Infrastructure Partners’ FPS Towers in 2012 for €185mn (originally retaining 15% equity, which Antin subsequently bought in 2015). FPS Towers expanded their portfolio to over 2,400 sites and secured the rights to 20,000 rooftops and 76,000 electricity pylons. In 2016, Antin subsequently sold FPS Towers to ATC Europe (American Tower’s European arm in which Dutch pension fund PGGM has a 49% stake) for a total of €697mn. As of Q4 2019, ATC Europe has a portfolio of 2,525 sites in the country although has recently signed a contract to build between 900 and 2,000 sites for Orange (primarily in rural areas and along transport routes) between 2020 and 2024.
Bouygues Telecom has also completed several tower transactions with Cellnex. In 2016 they sold 500 towers (an initial tranche of 230 towers, followed by a second tranche of 270) to Cellnex for a total of €147mn; in February 2017 they signed a third deal with the aforementioned governing the transfer of 1,800 urban (primarily rooftop) sites and 1,200 new build towers for a total of €854mn; later the same year they signed a further deal with Cellnex transferring a further 600 sites for €170mn. In December 2018, the operator deepened their relationship with Cellnex, signing an agreement for the towerco to provide distributed processing capabilities (edge computing) at 88 strategic telecom centres. Bouygues is understood to retain a portfolio of around 3,250 sites in France.
In 2018, MNO SFR (owned by Altice) carved out their towers into a new towerco, SFR Towerco, in which they subsequently sold a 49.99% stake to investment firm, KKR and rebranded the unit to “Hivory”. Hivory owns a portfolio of 10,198 towers in the country and has a build to suit contract in place with SFR for the addition of approximately 1,200 new sites.
France’s newest MNO, Free Mobile (owned by Iliad) is the latest operator to announce a tower sale in the country, reaching a deal with Cellnex for the sale of its 5,700 sites, retaining a 30% stake in the assets. The transaction also involves a build to suit component with Cellnex to add up to 2,500 new sites for the operator.
Cellnex’s total site count (as of Q1 2020) in France stands at 8,630 sites (excluding DAS nodes and Metropolitan and Central Offices), with the towerco having contracts in place to build a further 4,700 sites.
Broadcast-telecom hybrid TDF has 7,728 telecom towers as well as an established broadcast business and growing fibre interest. In 2016, TDF acquired the previously family owned, towerco, ITAS TIM and its 420 towers for a reported €100mn. In 2019, TDF’s shareholders, Brookfield and PSP (whose collective shares amount to 67%) commenced proceedings to sell their shareholdings. The sale reportedly attracted the interest of bidders including Macquarie, Antin Infrastructure Partners, Digital Colony and American Tower but the process was cancelled with rumours suggesting the bids fell short of the sellers’ valuation expectations. Rumours suggest that TDF may once again come to market in 2020.
Broadcast towerco, TowerCast (owned by NRJ Group) which owns around 500 sites also sell co-locations to telecom clients in the country. NRJ announced that TowerCast would come to market in 2017, but the deal has quietly slipped off the radar since.
Some reports suggest that France may need as many as 50,000 new points of presence, with the regulator, ARCEP, stipulating that the three most established operators (Orange, SFR and Bouygues) must add a further 15,000 points of presence between them. The newest market entrant, Free Mobile, needs to gain a further 10,000 points of presence to compete with its peers, with its roaming agreement with Orange also set to expire at the end of 2020 (although rumours have suggested that this may be extended). Co-location on existing structures will help hit the PoP targets but new build is still expected, with Cellnex committed to add up to 4,300 sites through its BTS agreements with Bouygues and Free, and Hivory committed to add up to 1,200 sites for SFR. The French government is also heavily incentivising MNOs to build towers in rural areas.
In early 2019, it was announced that France would have a 5G auction by the end of the year. By 2022, at least 75% of an operator’s footprint must be 5G capable, rising to 100% by 2030.
Figure 2: Ownership of France’s 58,590 sites
Germany
Total towers: 81,046
MNOs: O2 (Telefónica), Telekom (Deutsche Telekom), Vodafone
Towercos: ATC Europe, Deutsche Funkturm, Media Broadcast Group, Telxius, Vodafone TowerCo*
*In the process of being formed
Market leading mobile network operator, Telekom (owned by Deutsche Telekom) founded their infraco Deutsche Funkturm in 2002, initially as a subsidiary but then restructured into a “sister company” in 2017 with a view to commercialise their assets more actively. DFMG is now held under a newly created unit, GD Towers alongside Deutsche Telkom’s Dutch infraco, T-Infra. Deutsche Funkturm (DFMG) manages a portfolio of over 31,000 sites of which 500 are high towers, c. 8,700 masts and the balance rooftops. The infraco also took control of 7,700 former Telefónica rooftop assets under the name Omega Towers, with DFMG understood to be partway through a decommissioning program to reduce this to 5,000 sites. The infraco provides power to their tenants on around 3,000 sites, through Deutsche Telekom subsidiary, PASM.
In 2016, Telefónica carved their 2,350 German ground based towers into a newly created infraco, Telxius, in a deal valued at €587mn (with the operator also transferring Spanish and CALA towers as well as 31,000km of subsea cabling into the infraco). Telefónica subsequently sold a 40% stake in Telxius to investment firm KKR, before selling an effective 9.99% stake to Pontegadea), leaving the operator with a controlling 50.01% stake in the infraco. Telxius’ German portfolio currently stands at 2,385 sites. Telefónica currently retains 19,000 sites (outside of Telxius) in the German market, the majority of which are understood to be rooftops. In September 2019, Telefónica announced that it planned to accelerate the monetisation of further assets, with the operator stating that it was considering various options, including a sale of the assets to Telxius.
Vodafone currently owns 19,300 towers in the market of which 4,000 are ground based towers and the balance, rooftops. In June 2019, Vodafone announced that it was carving out its 61,700 European towers into an as yet unnamed entity referred to as “TowerCo”. Vodafone has stated that it is working towards a 2021 IPO of a stake in its towerco unit although has said that it is exploring different monetisation strategies in different markets in parallel (preferring in all instances to retain majority control, or co-control with other operators although not necessarily ruling out a minority position should an attractive enough opportunity arise). The fact that the Vodafone has decided to headquarter its towerco in Germany strongly indicates that they plan for the German assets to be held under their towerco unit.
With two, and potentially soon three, MNO captive towercos in the German market, independent towercos have yet to get as strong a hold as they have in other European countries. American Tower however entered the German market back in 2012 with the acquisition of KPN’s 2,000 E-Plus towers for €393mn (KPN having since sold E-Plus to Telefónica). American Tower have since transferred their German assets to ATC Europe (American Tower’s joint venture with PGGM, in which the towerco has a controlling 51% stake) and their portfolio has grown slightly over the last six years to a total of 2,211 sites (as of Q4 2019), mainly through the acquisition of 186 transmission towers from German broadcaster WDR. Although the cost of these towers was not publicised, we estimate that American Tower probably paid around €35-50mn for the assets.
German broadcast towerco Media Broadcast Group owns a further 450 towers in Germany, and was acquired by Freenet in 2016 for €295mn (around 12x EV/EBITDA).
Whilst co-location potential remains strong on Germany’s ground based towers (DFMG reports a 2.3x co-location ratio), unique conditions in the German market means that the tenancy ratio on rooftop sites sits at almost exactly one. Landlords in Germany typically agree rooftop leases on a per operator basis rather than per site basis and as such, the synergies available from passive sharing on rooftops are greatly reduced.
In November 2019, the three operators announced an initiative to jointly cover white spots (primarily in rural areas and along transport routes) which would otherwise be uneconomic to cover. Each operator will build 2,000 sites which will be made available for the other two players to use via passive sharing agreements.
Vodafone and Deutsche Telekom have also teamed up to improve LTE coverage in rural areas and along traffic routes at so called “grey spots” - areas where LTE quality coverage is only available from a single operator. The two parties plan to implement active network sharing across 4,000 antenna sites using a MOCN approach.
New build in the German market remains significant. Vodafone states that it needs to add 10,000 new sites over the next four years (using either it’s towerco or third parties). DFMG is expected to add 2,000 new sites in 2020 alone.
Figure 3: Estimated breakdown of ground based towers and rooftops in Germany
Greece
Total towers: 12,156
MNOs: Cosmote (OTE), Vodafone, WIND (Largo)
Towercos and JV Infracos: Digea, VICTUS Networks, Vodafone TowerCo*
*In the process of being formed
There are three MNOs in the Greek market with Cosmote with the largest market share and an estimated 5,000 towers. Cosmote is 100% owned by OTE which is in turn 40% owned by Deutsche Telekom. Deutsche Telekom recently announced that its infraco, Deutsche Funkturm will look to expand beyond its German borders and start to consolidate assets from its other international opcos. Whether these plans will extend to Greece where the opco’s ownership structure complicates matters remains to be seen.
Vodafone and WIND’s combined network of around 7,000 sites is managed by a network sharing joint venture called VICTUS Networks. VICTUS Networks was formed in 2014 and used a partial MORAN business model. The recent announcement by Vodafone that it plans to carve out its European towers into its own captive towerco may lead to the dissolution of VICTUS Networks as Vodafone looks to extract its c. 3,500 towers. Wind Hellas is currently for sale with Iliad having been linked to the transaction.
Broadcast infraco Digea has 156 sites in the country.
Ireland
Total towers: 4,683
MNOs: 3 (CK Hutchison), eir, Vodafone
Towercos: Cellnex, Hibernian, Highpoint (Obelisk), Shared Access, Towercom, Wireless Infrastructure Group, CK Hutchison Networks*, Vodafone TowerCo*
*In the process of being formed
There have been no sale and leaseback transactions in the Irish market, with the country’s three MNOs owning just over 50% of the country’s towers.
Both Hutchison (3) and Vodafone have announced plans to carve their European towers into their own towercos, with Hutchison stating they have 1,100 Irish sites (of which 800 are thought to be towers) and TowerXchange estimating Vodafone to have around 800 Irish towers. Eir is understood to have closer to 500 towers in the market.
Ireland had two network sharing ventures in place, Netshare (between Vodafone and 3, which was then restructured to be owned by Vodafone) and Mosaic (between Eir and O2; which since O2’s takeover by 3 involved three MNOs, but recent reports suggest that it too is being dissolved).
There is a long tail of independent towercos in the Irish market who collectively own almost half of the country’s towers. The biggest towerco players are Towercom (with 400 towers) ESB Telecoms (with 377 towers) and Cellnex (owning 322 towers and the land under a further 224 towers after their 2019 acquisition of Cignal). Shared Access, Highpoint, Hibernian, Wireless Infrastructure Group and AP Wireless own further sites with the Office of Public Works and CIE (the Irish Railway company) making further sites available for co-location.
Apart from Cellnex’s acquisition of Cignal, there has been some small scale M&A between the independent towercos in the Irish market and further consolidation could be on the horizon in the future. In terms of new build, Cellnex anticipate the investment of a further €60mn into a pipeline which they foresee yielding a further 600 BTS sites by 2026.
Figure 4: Who owns Ireland’s 4,683 cell sites
Italy
Total towers: 43,800
MNOs: Iliad, TIM (Telecom Italia), Vodafone, Wind Tre (CK Hutchison)
Towercos: Cellnex, EI Towers, INWIT, HighTel, Rai Way, TowerTel (EI Towers), CK Hutchison Networks*
*In the process of being formed
The Italian market has seen a host of different tower monetisation strategies by its resident operators.
The first operator to monetise its portfolio was Wind (at the time owned by Vimpelcom) who carried out a sale and leaseback transaction of their portfolio of 7,377 towers (which it had carved into “Galata Towers”) to Cellnex back in 2015, originally retaining a 10% stake (with Cellnex taking over the operator’s 10% stake in 2017).
The same year, TIM, the mobile arm of Telecom Italia, carved out its tower portfolio into a dedicated infrastructure unit, INWIT and listed a 40% stake on the Milan Stock Exchange, raising €875.3mn in the process.
In 2016, VimpelCom’s Wind and CK Hutchison’s 3merged to form Wind Tre, with the merger being approved on the condition that spectrum and towers were provided to a new market entrant to ensure competition. This opened the door to France’s Iliad who entered the market in 2018 with an aggressive low cost strategy.
In May 2019, Iliad became the second operator to carry out a sale and leaseback transaction in the country, reaching a deal to sell its 2,200 sites to Cellnex for €600mn (Iliad/Salt also agreed the sale of its French and Swiss tower portfolios to Cellnex at the same time). The deal also included a build to suit component for an extra cash consideration, with Cellnex to build up to 1,000 new towers for the operator.
In July 2019, Vodafone became the next operator to announce it had plans for its towers. After announcing its intent to carve out and monetise its portfolio of 61,700 European towers, fresh news emerged from its Italian opco, with Vodafone reaching a deal to combine its 11,000 tower portfolio with TIM’s INWIT. The deal (when finalised) will create a listed towerco managing 22,100 sites, with Vodafone receiving €2.14bn in cash plus a 37.5% stake in the combined company. Vodafone and TIM will retain joint control of INWIT, with the two operators planning to reduce their respective shareholdings from 37.5% to 25%. INWIT will have first refusal on new build for the two operators with a target of building a total of 10,000 new macro sites and small cells by 2021. The arrangement also involves active sharing as the two parties look to reduce the cost of 5G rollout in the country. The deal is still subject to regulatory approval with the EU having postponed a decision until early March.
The most recent piece of tower news in Italy (at the time of writing) came from Hutchison’s WindTre (Hutchison having bought out VimpelCom’s 50% stake in the operator back in 2018). In August of 2019, Hutchison announced that it planned to carve its 28,500 European towers into its own towerco, CK Hutchison Networks, with the operator owning 8,100 towers in Italy. Whilst a carve out can often precede a sale, this does not currently appear to be on the cards for Hutchison with the operator answering a flat “no” when asked if they planned to monetise their towerco.
In terms of how all that activity affects the lay of the land in Italy, 50% of the country’s 43,800 telecom towers are owned by an operator-captive towerco (INWIT; pending the closure of the merger with Vodafone’s towers), with this figure set to rise to 69% when Hutchison’s carve out of their towerco is finalised. Cellnex is by far the largest of Italy’s independent towercos with 10,485, sites, a figure set to rise to 12,685 when all the build to suit commitments have been realised.
Cellnex entered the Italian market in 2014, buying TowerCo (the operator which managed towers along the Italian motorway network) and its 306 sites from Atlantia. In addition to acquiring the TowerCo, Wind and Iliad towers, Cellnex also acquired Italian small cells and DAS player, CommsCon back in 2016 and has been highly active in the small cells and DAS space.
In addition to Cellnex, there is a long tail of smaller independent towercos active in Italy with some of the most notable players being EI Towers’ TowerTel (with 1,000 sites) and HighTel (with 300 sites). Both Cellnex and TowerTel have been active consolidators of smaller towercos in the market.
In addition to 43,800 telecom towers there are a further 4,600 broadcast towers in the market, with EI Towers and Rai Way each of owning 2,300 sites. EI Towers delisted from the Milan Stock Exchange in 2018 through an acquisition by F2i and Mediaset through JV 2i. TowerXchange believes this delisting was completed as a result of EI’s desire to acquire Italy’s other broadcast towerco, RaiWay.
Figure 5a: Ownership of Italy’s 43,800 telecom towers
Figure 5b: Ownership of Italy’s 4,600 broadcast towers
The Netherlands
Total towers: 15,174
MNOs: KPN, T-Mobile (Deutsche Telekom), VodafoneZiggo (Liberty Global/Vodafone)
Towercos: Cellnex, Open Tower Company, T Infra, Wireless Infrastructure Group
The Netherlands set the stage for the first sale and leaseback transactions in Europe, with KPN divesting towers in four tranches; 601 towers across two deals to Open Tower Company, 460 sites to Shere Group and 261 sites to Protelindo. Cellnex has since acquired both the Shere Group and Protelindo assets in the Netherlands.
Cellnex has also completed one further M&A deal in the Netherlands with the acquisition of Alticom and their 30 long range sites (tall towers with large equipment capacity). Such sites with their large capacity and fibre connectivity serve as ideal locations to host remote or “caching servers” (edge computing) which will form an important component of 5G connectivity. Cellnex’s acquisition of Alticom was as much about these strategic sites as it was about gaining Alticom’s expertise in the field of edge computing.
Cellnex now owns a total of 919 towers in the Netherlands. Open Tower Company (in which Dutch pension fund, ABP acquired a 75% stake in 2017) owns 860 sites as well as access to over 1,000 electricity pylons. The UK’s Wireless Infrastructure Group has a portfolio of 50 towers in the market.
Deutsche Telekom has carved its 3,100 towers (of which around 650 are thought to be ground based) into infraco subsidiary T Infra (which is held under Deutsche Telekom’s unit GD Towers alongside Deutsche Funkturm).
Whilst Vodafone has announced plans to carve the vast majority of its European towers into a captive towerco, the towers belonging to their Dutch opco, VodafoneZiggo have been excluded from this arrangement and thus will remain on VodafoneZiggo’s balance sheet.
In addition to the 3,128 ground based towers, there are c. 12,000 rooftop, small cell and DAS sites across the Netherlands.
Figure 6: Netherlands tower ownership
Nordics
Total towers:
Denmark: 3,875
Norway: 12,100
Sweden: 14,500
Finland: 5,700
MNOs:
Denmark: 3 (Hutchison), Net1 (ice group), Telenor,
Telia, YouSee (TDC)
Norway: Ice, Telenor, Telia
Sweden: 3 (Hutchison), Net1 (ice group), Tele2,
Telenor, Telia
Finland: DNA, Elisa, Telia, Ukko Mobile
Towercos, broadcast towercos and JV infracos:
Denmark: TT-Network, Teracom, CK Hutchison Networks*
Norway: Telenor Infra, Telia Towers
Sweden: 3GIS, Net4Mobility, SUNAB, Teracom, Telia
Towers, CK Hutchison Networks*
Finland: Digita (Digital Colony), Telia Towers, YhteisVerkko
*in the process of being formed
There are a number of network sharing joint ventures in Scandinavia. In Sweden network sharing is efficiently managed through three network sharing joint ventures namely 3GIS (Telenor+Hi3G, with around 2,000 sites), SUNAB (Tele2+Telia, with around 1,300 sites) and Net4Mobility (Tele2+Telenor, with around 900 sites). Both 3GiS and SUNAB were formed to manage the cost effective rollout of 3G in the country but with 3G set to be turned off in Sweden, the joint ventures are being wound down and the towers will likely be absorbed by their parent companies. In Denmark TT-Networks manages network sharing between Telia and Telenor (and operates around 1,200 sites) and in Finland, Yhteis Verkko manages network sharing between Telia and DNA in sparsely populated areas of the country.
Telia has established towercos in its Finnish, Norwegian and Swedish operations, with the Finnish towerco the most established business and the other two units in the process of being formed. In Finland Telia Towers has 3,000 sites, in Norway 2,000 and in Sweden 1,600.
Telenor has carved out its mobile and fixed infrastructure in Norway (including its broadcast assets from Norkring) into a separate infraco called Telenor Infra. Telenor Infra has 10,000 sites that are used for mobile with a further 5,000 sites used for broadcast. The operator continues to explore carve out options in other Nordic markets although joint ventures in the countries present challenges to overcome.
CK Hutchison has announced plans to carve out its 28,500 European towers into its own captive towerco, CK Hutchison Networks with the operator owning 1,200 towers in Denmark and 6,200 in Sweden (although c. 1,000 Swedish towers are held and managed through 3GIS, their joint venture with Telenor and insiders suggest their 6,200 count to be high).
Denmark’s TDC has split its business up into one business which will manage its customer facing brands (Nuuday) and another that will design, operate and develop TDC’s network (TDC NetCo). TDC NetCo is understood to have around 1,100 towers.
In addition to the JV infracos and MNO- captive towercos being created there are broadcast towercos active in the Nordic region (bar Norway where Norkring’s towers have been absorbed by Telenor Infra). Teracom is the broadcast towerco in Denmark and Sweden. In Finland, broadcast towerco, Digita was acquired by Digital Colony in 2018 giving Digital Colony a portfolio of 579 towers, 1000km fibre and four data centres in the country.
Figure 7: Scandinavian JV infracos
Figure 8: Tower ownership in Scandinavia
Poland
Total towers: 22,000
MNOs: Orange, Play (P4), Plus, T-Mobile
Towercos and JV infracos: Emitel, NetWorkS!
There are around 22,000 telecom structures in the Polish network, with approximately 40% being ground based towers.
Poland has more subscribers per tower than the majority of other countries in Europe, indicating both potential demand for more towers, and indicating the extent of decommissioning that has already taken place in the country. A balanced, competitive MNO market amplifies the attractiveness of the Polish market to towercos.
T-Mobile and Orange share passive and active infrastructure in Poland through 50-50 joint venture NetWorkS! While NetWorkS! operates around 13,000 towers, the assets remain on T-Mobile and Orange’s own balance sheets. Initiated in 2011, the partnership was intended to last 15 years, but there has been speculation that one or both parties might wish to exit the venture and sell towers to a third party. T-Mobile is 100% owned by Deutsche Telekom, with Deutsche Telekom recently announcing that its infraco, Deutsche Funkturm will look to expand beyond its German borders and start to consolidate assets from its other international opcos. Deutsche Telekom has already carved its 3,000 Dutch towers into a newly created infraco, T Infra, with the Austrian towers expected to be carved out next. Whether the operator has plans for its Polish assets remains to be seen. Orange has announced plans to carve out its French and Spanish towers into separate towercos and hinted that they may look to roll out the strategy across other markets.
Rumours have also been circulating that Play’s towers may come to market.
Alinda Capital Partners owned Emitel is the Polish broadcast towerco, operating 377 sites and diversifying into telecom. It was rumoured that Emitel would be coming to market in 2018, but no further developments were reported.
Outside of the NetWorkS! venture, as little as 2% of Poland’s towers are shared between multiple MNOs.
Portugal
Total towers: 11,850
MNOs: MEO (Altice), NOS, Vodafone
Towercos: Cellnex
TowerXchange understands there to be ~7,100 ground based towers in Portugal, with a further ~4,700 sites in use across different topographies (rooftops, street poles, utilities etc). With no known bilateral sharing agreements in place between MNOs, co-location has been organised on an ad-hoc basis and the tenancy ratio across the country is close to one (the only exception to this being indoor DAS projects, where one operator provides the infrastructure and shares with the other two).
Altice’s MEO had the largest tower portfolio with 2,961 traditional structures, which have were carved out into towerco OMTEL (formerly Towers of Portugal). In 2018, Altice sold a 75% stake in OMTEL to a consortium including Morgan Stanley and Horizon Equity Partners. In January 2020, Cellnex acquired 100% of OMTEL for €800mn, a deal which also includes a BTS commitment of 400 new sites for MEO over the next four years.
Vodafone owns approximately 2,500 towers in Portugal. In the summer of 2019, Vodafone announced that it was carving out its European towers into a new, as yet unnamed, towerco with the Portuguese towers included in this plan. Whilst Vodafone is looking into a 2021 listing of its towerco, the operator has not ruled out alternative monetisation strategies in different markets, pursuing different options in parallel (although the operator has a strong preference to retain majority control).
Mobile network operator, NOS has about 1,300 towers in the market. In addition, there are around 350 broadcast towers run by state-owned Radiotelevisão Portuguesa, although TowerXchange is not aware of any current co-location agreements with Portugal’s three MNOs.
Figure 9: Tower ownership in Portugal
Russia
Total towers: 139,000
MNOs: Beeline (VEON), MegaFon, MTS, Tele2 (plus regional players)
Towercos: First Tower Company, Russian Towers, Service Telecom, Vertical (plus several hundred small players)
TowerXchange estimate there are around 73,600 ground based towers and 65,400 rooftop structures across the vast Russian landscape. Each of Russia’s four MNOs has looked at utilising tower company business models, but in contrasting ways.
Russia’s biggest MNO, MTS has shown the least interest in selling towers, but the operator has taken steps in terms of both using third party towers and sharing their own structures. In 2016, Vice-President of Technology and IT Andrey Ushatsky stated that “Our business-model allows us to provide potential tenants with favorable financial conditions. We would also like to announce that for our partners’ added convenience, we have devised a simple contract structure that does not require long-term obligations, additional fees for access to infrastructure, penalties for early termination and other factors that potential tenants will find attractive”. It was believed that MTS would make around 30% of their 16,500 tower portfolio – ~5,500 towers) available for co-location, but there is currently doubt as to whether this operator-captive towerco has yet got off the ground.
MegaFon had carved out it’s 17,000 towers into First Tower Company, which it had announced would come to market in 2019. In autumn 2019, local media reported that a sale had formally been announced with two bidders, a Russian towerco and a European towerco, reportedly in the running along with a handful of other parties.The acquisition of a stake in Russian towerco, Vertical by former MegaFon CEO, Ivan Tavrin who expressed his appetite to consolidate the Russian tower market strongly suggests Vertical to be one of the shortlisted bidders. After a large number of meetings were held in late 2019, all seems to have gone quiet at present suggesting that MegaFon have put the plans on hold whilst they consider their options.
Following the leak about MegaFon’s tower sale, VEON (trading as Beeline in the country) announced that they were reconsidering the sale of their towers. VEON had previously carved their ~14,000 towers into ‘National Tower Company’, a move hailed as a precursor to a tower sale. Discussions reached advanced stages with Russian Towers reported to be the frontrunner in the process. In May 2017, VEON however pulled the plug on the process and reabsorbed the towers back into the opco.
Rumours had circulated that Tele2 Russia planned to sell their towers (which now number around 12,000), but no concrete process entered into the public domain. In Q3 2019, Russian state-backed national telco, Rostelcom (which currently has a 45% stake in the operator) had plans approved for a full takeover of Tele2 suggesting a change of tack on the horizon.
Owners of Russia’s fixed line network and the biggest fibre owner in Russia, also offering data centres and digital solutions, Rostelcom is positioning itself as a key player in Russia’s future connectivity. Its ‘Strategy 2022’ sets out the company’s transformation from a telecoms operator into an IT-company, with the company announcing a joint venture with Nokia (called RTC network technologies) focussed on forming a portfolio of “innovative, high tech infrastructural solutions”. There is a growing sentiment among government stakeholders that Rostelcom may be the most suitable vehicle for the Russian government to use in order to roll out 5G infrastructure quickly, with the company owning much of the required infrastructure already. Rostelcom’s complete takeover of Tele2 (making Tele2 effectively Rostelcom’s mobile arm) will add a much needed portfolio of high towers to their arsenal, and should the operator do a deal with MegaFon’s First Tower Company to either acquire or use their infrastructure, the operator would obtain the national reach it requires and potentially function as a state-owned tower company, akin to China’s China Tower Corporation.
Whilst no sale and leaseback transactions have happened in Russia, there is buoyant independent towerco market in the country, headed by Russian Towers (with around 5,100 sites), Vertical (with around 3,500 sites primarily in the Moscow region) and Service Telecom (with 2,000 sites). In addition to this there are over a hundred small private tower owners who collectively own around 3,000 towers.
Russian Towers is the country’s largest towerco which has demonstrated impressive organic growth (adding 819 new sites in 2018). The company now has a presence in 60 regions in the country, with approximately 60% of the towerco’s sites in the Moscow region. The company is building a network which includes lampposts, electricity grid poles, transport structures and land ownership.
Founded in 2013 and based in Moscow, Vertical has grown their portfolio to around 3,500 towers in total, taking advantage of Tele2’s roll out activity in the region for much of this growth. By 2016, Vertical had gained enough momentum to take part in the bidding process for the VEON towers, and remain ambitious to grow in the Russian market.
The youngest of Russia’s larger towercos, Service Telecom was founded in 2015 and built around 350 towers in their first year of operations. Also highly ambitious and led by a new generation of business graduates, they hope to shake up the Russian market and capitalise on the potential for rapid growth. Their acquisition of Russia’s fourth largest towerco Link Development in 2017, plus rapid organic growth, has seen Service Telecom build their portfolio to 2,000 towers.
Figure 10: Tower ownership in Russia
Spain
Total towers: 38,022
MNOs: Movistar (Telefónica), Orange, Vodafone, Yoigo (Masmovil)
Towercos: Axion, Cellnex, Telxius, Vodafone TowerCo*
*In the process of being formed
54% of Spain’s 38,022 towers are owned by towercos, primarily Cellnex and Telefónica’s Telxius. Cellnex acquired the bulk of its portfolio through a number of transactions with Telefónica and Yoigo across 2012-2014 (and also owns a portfolio of broadcast assets in the country); Telxius was formed when Telefónica carved out its c. 11,000 sites back in 2016 (transferring the remainder of its sites in Q3 2019). Axion (which was acquired by AMP Capital in 2018) operates a portfolio of c. 600 broadcast sites, of which 70% are in Andalucía.
Vodafone owns a portfolio of 9,700 towers in the country, which it is in the process of carving out into a towerco unit (along with towers across most of its European footprint). The operator is gearing up for a 2021 IPO of the towerco and whilst Vodafone has hinted that they may explore different monetisation strategies in different markets it is widely expected that their Spanish towers will be part of the unit that will be listed.
In late 2019, Orange announced plans to carve out assets and create its own towerco, starting in France and Spain but with plans to rollout across its wider European portfolio. In Spain, Orange has 7,700 sites. At the time of the announcement of its towerco plans, Orange also reached a deal to sell 1,500 non-strategic sites to Cellnex.
In terms of preparation for 5G, Spain’s towercos have been proactive, with Cellnex announcing some high profile small cell and DAS partnerships with venues such as the new Wanda Metropolitano and partnering with JCDecaux, and Axion recently partnering with UK towerco Wireless Infrastructure Group to form a new venture called Iberia Small Cells Network, which will provide neutral host services to venues and municipalities in the region. Both Cellnex and Axion have also entered the fibre space with Cellnex acquiring Xarxa Oberta de Catalunya (with 3,000km of fibre) and Axion partnering with Enagas to launch a new fibre operator Axent, with a national network of 5,000km across Spain.
Figure 11: Ownership of Spain’s 38,022 towers
Switzerland
Total towers: 11,193
MNOs: Salt, Sunrise, Swisscom
Towercos: Cellnex
The Swiss market has seen two sale and leaseback transactions by its operators in recent years. In 2017, Sunrise reached a deal with a consortium involving Cellnex, Swiss Life and Deutsche Telekom Capital Partners for the sale and leaseback of its 2,399 sites for €430mn (with the deal including an additional build to suit component which also involves the deployment of 200 DAS nodes). In 2019, Salt reached a deal with Cellnex for the sale of a 90% stake in its 2,800 site portfolio (with Cellnex planning further investment to add up to 500 further sites for the operator). Swisscom is understood to have around 6,050 sites in the market.
Around two thirds of Switzerland’s cell sites are rooftops as opposed to ground based towers, although many of those rooftops have ‘stub’ towers on them, making them more readily co-locatable. New build (and co-location) dynamics in Switzerland are affected by EMF regulation, which are the strictest TowerXchange has encountered.
Cellnex has a build to suit pipeline of 975 sites in the country.
Figure 12: Tower ownership in Switzerland
Turkey
Total towers: 48,788
MNOs: Turk Telecom, Turkcell, Vodafone
Towercos: Global Tower, PTT Kule, TRT
The Turkish tower market is dominated by Global Tower, Turkey’s biggest towerco, currently 100% owned by Turkey’s #1 MNO, Turkcell.
Of the 8,288 towers marketed by Global Tower, around half are on the towerco’s balance sheet, the other half remain on Turkcell’s balance sheet.
Global Tower initially struggled to be recognised as independent of its parent company: for several years Turk Telecom refused to co-locate on Global Towers’ sites, although Vodafone did from the outset. Turkish MNOs remain reluctant to pay a commercial rate to lease a site, resulting in Global Towers’ tenancy ratio (~1.3) being lower than other towers (~1.5) which are shared on a barter basis.
In 2016 Global Tower attempted an IPO on the Istanbul Stock Exchange, which was postponed shortly before the planned flotation date. Since pulling the IPO they have focussed on growth, offering fibre to their customers through Turkcell’s fibre arm, SuperOnline, reselling satellite connectivity to both their tenants and aiming to acquire and consolidate the majority of the towers in Turkey before embarking on a large decommissioning regime. With an eye on doubling their revenues, they now expect to reschedule the IPO for some time in the next three to five years.
Whilst Vodafone has announced plans to carve its European towers into its own towerco, their Turkish operations straddling Europe and Asia are not included in such plans. Vodafone is understood to own around 6,300 towers in the market.
Turkey’s final operator, Turk Telecom is understood to own around 5,400 towers.
A quirk of the Turkish market is that the infrastructure rolled out for 2G in the early 2000s, a total of around 16,000 towers, will revert to the Ministry of Transport and Communications in 2023. As yet it is not clear what the government will do with these assets: it has been widely believed that the government would not have the appetite or resources to manage such a large portfolio of towers and would hand them back to the MNOs, but the current investability of telecoms infrastructure means no option is currently off the table.
Turkey is home to one of the world’s largest government-owned universal service networks, called ‘Universal Services Project’ and implemented by the Ministry of Communication and Transportation. Phase one of the project was auctioned in 2011, with Turkcell implementing 1,100 rural sites following a successful bid. Phase two was awarded to a joint venture between Vodafone and Turk Telekom with plans to build a further 2,500-3,000 RANsharing sites in rural areas.
In addition, the Turkish government has just launched a new towerco called PTT Kule Inc, which is focussed on very large scale tower structures for telecoms and broadcast as well as hosting data centres and other facilities. PTT Kule are planning as many as 40 high towers across Turkey in the next few years.
Figure 13: Towers owned or managed in the Turkish market
United Kingdom
Towers: 42,572
MNOs: 3 (CK Hutchison), EE (BT), O2 (Telefónica), Vodafone
Towercos and JV infracos: Cellnex, Cornerstone, The Freshwave Group, MBNL, Shared Access, Wireless Infrastructure Group
The UK market has a unique structure with two joint venture infracos, Cornerstone (between Vodafone and O2 (Telefónica)) and MBNL (between EE (BT) and 3 (Hutchison)) owning over 70% of the country’s total stock of towers. MBNL is a deeper infrashare than Cornerstone, inclusive of active network sharing, but in contrast to Cornerstone, MBNL does not have EE and 3’s towers on its balance sheet. Whilst infrastructure sharing businesses in their own right, Cornerstone and MBNL are the primary clients of UK’s towercos managing leasing arrangements on behalf of their own shareholders. Cornerstone report that they have 6,500 presences on towers belonging to other towercos.
Recent announcements by Vodafone, CK Hutchison and Telefónica that they plan to carve out their tower assets (and in the case of Vodafone and Telefónica, monetise them) will likely see the shake up and potential break-up of the UK’s JV infracos. Should the towers come to market, there are a number of independent towercos active in the market who would likely throw their hat in the ring.
Cellnex entered the UK market in 2016, with the acquisition of Shere Group and their portfolio 540 UK sites (whilst also acquiring their Dutch assets). The towerco then strengthened their position in the UK signing a long term strategic agreement with BT for the management and marketing of 220 high towers owned by the operator. In October 2019, Cellnex announced that it had reached a deal to acquire the telecoms division of Arqiva. In the £2bn deal, Cellnex will take ownership of 7,400 sites whilst securing the rights to market a further 900 Arqiva sites, giving the towerco significant scale in the UK market (although potentially precluding them from acquiring Cornerstone or MBNL’s towers should they come to market). The deal will also see Arqiva’s concessions to use street infrastructure in 14 London boroughs transfer to Cellnex.
Digital Colony has been similarly acquisitive in the UK market, albeit more focussed on the small cells and DAS market. In 2018, Digital Colony acquired two UK indoor coverage providers, Stratto and OpenCell, then in 2019 acquired iWireless Solutions and Spyder Facilities. Digital Colony has combined the four business into their new digital infrastructure platform, “The Freshwave Group”.
In addition to Cellnex and Digital Colony, there are a number of other independent towercos operating in the UK market, the largest of which is Wireless Infrastructure Group with over 2,000 sites. In late 2019, Wireless Infrastructure Group was acquired by Brookfield, giving them significant financial backing to participate in any European M&A on the horizon.
Further towercos include Britannia/Hibernian Towers and Shared Access.
Figure 14: Ownership and management of the UK’s 42,572 towers
Spotlight on the CIS
With the CIS region included in TowerXchange’s European coverage we take a quick look at some of the key tower activity across select markets.
Ukraine
Towers: 21,601
MNOs: Kyivstar (VEON), lifecell (Turkcell) Vodafone (MTS), TriMob (Ukrtelecom) plus regional players and MVNOs
Towercos: UkrTOWER
Veon’s Kyivstar is the market leader in a four MNO market. Kyivstar’s primary competition comes from an MTS subsidiary, which trades under the Vodafone brand (and who is looking for a buyer for their opco), and Turkcell’s lifecell. TriMob, the mobile brand of fixed line incumbent UkrTelecom, completes the landscape.
In 2016, Turkcell carved out and transferred 811 lifecell towers to UkrTOWER, the local subsidiary of their captive towerco Global Tower. UkrTOWER’s current site count is 1,201, including a number of in building solutions, and the company boasts a healthy tenancy ratio. Outside of UkrTOWER, only 3-5% of towers and rooftops in Ukraine are shared, mostly at nominal prices or under barter arrangements.
In 2017 VEON decided to bring their Ukrainian towers to market (in conjunction with towers in Kazakhstan, Armenia and Georgia). The deal was quietly scrapped after the sale of VEON’s Russian towers was cancelled in May 2017, but rumours have persisted that VEON may be courting a new buyer with experience in the region. VEON have an estimated 7,400 towers in Ukraine.
Vodafone’s site count is thought to stand at 6,000, TriMob’s at 2,000 and lifecell are understood to retain around 4,000 towers in the market. A further 1,000+ leased third party structures, such as smoke stacks and water towers, are utilised by Ukraine’s MNOs, while the core site count includes around 60% ground based towers, 40% rooftops, bringing the total unique site count (excluding co-locations) to around 21,600.
Figure 15: Tower ownership in Ukraine
Kazakhstan
Total towers: 15,500
MNOs: Beeline (VEON), kCell (Kazakhtelecom), Tele2/ALTEL (Kazakhtelecom)
Towercos: Logycom Group
Two of Kazakhstan’s MNOs, KCell and Tele2/ALTEL, are now 100% owned by state-backed Kazakhtelecom (Kazakhtelecom having acquired Tele2’s shareholding in the latter, mid 2019). Market leaders, Beeline are owned by Russia’s VEON.
Apart from VEON’s towers having come to market temporarily in 2017 (along with towers in other CIS markets) TowerXchange has recently heard rumours that one of Kazakhstan’s MNOs may be looking into a tower sale but is yet to verify which of the country’s operators this may be.
Figures TowerXchange has had reported for site counts in Kazakhstan vary with most parties agreeing VEON has around 3,500 sites (of which 60% are rooftops and 40% are ground based towers) and best guesses suggesting Kcell has around 5,500 and Tele2/Altel 4,200. Third party structures make up around 30% of Kazakhstan’s mobile networks, and total at least 1,500, perhaps significantly more.
TowerXchange knows of one towerco operating in Kazakhstan, Logycom Group which has approximately 100 sites in the market.
Figure 16: Estimated tower count in Kazakhstan
Georgian and Armenian
The smaller Georgian and Armenian tower markets consist of around 3,000 and 2,200 sites respectively. Around 65% of sites are rooftops, but less alternate site typologies are used than in Kazakhstan: just a handful of broadcast tower co-locations.
Both countries host three MNOs: Magticom (privately owned) has over 40% market share in Georgia, followed by Geocell (Fintur) and Beeline (VEON); while VEON, again trading as Beeline, is #2 in the Armenian market, joined by VivaCell (MTS) and Ucom. VEON entered the Armenian market by acquiring the former State monopoly fixed line operator, so they have several strategically important rooftop locations. Spectrum holdings in Georgia and Armenia were quite asymmetrical until 2016, when all MNOs were granted 4G spectrum, without however fully aligning the holdings between the MNOs. The effect is more pronounced in Armenia where locally owned Ucom (formerly Orange Armenia and now vying with Beeline for the #2 position) has a lot more spectrum than either market leader MTS or Beeline. In Georgia, market leader MagtiCom has the largest spectrum holdings. LTE rollout is well under way, with population coverage around 50% in both countries, and 3G at 70-80%.
There is very little existing infrastructure sharing in either country. The only towerco TowerXchange has heard of operating in these countries is GIS, but little is known about the company.
Figure 17: Estimated tower and rooftop counts for selected markets in Europe
Figure 18a: European MNO-towerco deals since 2008
Figure 18b: European towerco consolidation since 2015
Figure 18c: Major European towerco equity deals and listings since 2016
