Inwit shares surge 9% on trading debut

Telecom Italia has successfully spun off and listed towerco Inwit, with 11,519 towers on the balance sheet. In this brief summary, TowerXchange re-introduces Inwit, reviews the reception Inwit received on the Milan stock exchange, and contrasts Inwit’s market cap and subscription rate with obvious comp, Cellnex.

Inwit raised a gross €875.3mn from the IPO of a 40% stake in the company, excluding commissions and expenses, a sum which it is believed will be used to reduce Telecom Italia’s debt buden.

Inwit’s market cap now stands at an impressive €2.4bn. The original IPO price of €3.65 increased to €3.90 when stock opened on Monday morning and had advanced to €3.99 by 9.43am. The offering includes a ‘greenshoe’ offering which allows Inwit to list more stock if required. Of the stock listed to date, according to Italian paper Corriere della Sera, about 38% of the went to US investors, 35% to UK-based companies and only 12% to Italian investors. In comparison, half of Cellnex’s shares were sold to U.S. investors, while 25% were from the UK and 10% from Spain.

 

Cited in Bloomberg, Emanuele Isella, an analyst at Fidentiis Equities, said in a research note last week that Inwit’s stock may rise because of the company’s “higher M&A appeal, stronger organic growth potential, higher EBITDA margin and cash generation ability.” Inwit CEO, Oscar Cicchetti himself said that he believed the ‘narrative of the company’ has convinced people of Inwit’s value.

Cicchetti quashed rumours that Inwit may turn their interest to Italian national broadcaster Rai Way, telling reporters “We don’t believe there are many synergies between broadcast and telecommunication towers”, however rumours that the towerco will become increasingly acquisitive in the telecoms space were supported by his comment that “We have before us a couple of years in which there will be a consolidation of the sector and Inwit has the characteristics to participate.”

 

When comparing Inwit’s IPO to the recent Cellnex IPO, it’s easy to see where the differences lie. Cellnex’s proven track record in the acquisition and management of third party towers pushed their market cap up to €3.5bn, against Inwit’s market cap of €2.4bn. However, Inwit’s subscription rates and stock prices will doubtless have benefitted from Cellnex ‘blazing the trail’ and demonstrating high market confidence in the towerco model. With both companies achieving highly successful IPOs in Q2 2015, there’s no doubt that independent tower ownership is now firmly on the radar of investors, potential counterparties and prospective tenants alike.

Infrastrutture Wireless Italiane S.p.A., commonly known as Inwit, is the largest Italian towerco with a portfolio of 11,519 sites spread all over the national territory. Approximately 7,400 sites are located in suburban or rural areas with the remaining covering major cities and metropolitan hubs.

In March 2015, Telecom Italia created the Inwit business unit, allowing Inwit to take over all activities related to towers and other civil infrastructure with the goal to lease to both telecom and all other operators in Italy. Telecom Italia agreed to pay €253mn in annual rental to Inwit of which €140mn derives from the lease of 7,400 rural/suburban sites (€1577pcm) and €113mn derives from the remaining 4,100 urban towers (€2297pcm). The towerco expects to initially generate 90% of its revenue from its anchor tenant. However, sites are accessible to all operators in the country.

In terms of tenancy, a significant proportion of the Inwit towers already host more than one tenant as a result of a strong push in favour of infrastructure sharing which took place in Italy around 2004-2005, when operators realised that owning sites didn’t represent a competitive advantage. RBC Capital Markets estimates the Inwit tenancy ratio is currently 1.55, with TIM (Telecom Italia Mobile) as anchor tenant, Vodafone the primary second tenant and a further estimated 1,500 Wind tenancies. To put this in context, RBC Capital Markets puts the average tenancy ratio in Italy at 1.42.

With the Cellnex IPO only a month old, the Italian market has bred a new kind of acquisitive towerco; publicly listed, well-funded, and with solid foundations for growth. As the predicted Italian and European tower deal flow picks up over the next few months, TowerXchange watches with interest to see how the relationship between Europe’s biggest home-grown towercos will develop.