Introducing TOTEM

TOTEM, the new 26,000-site towerco formed from the carve out of Orange's tower assets in France and Spain commenced operations in late 2021. TowerXchange was excited to speak to TOTEM's CEO, Nicolas Roy to find out more about the company and its ambitions in the European tower market.

After months of hard work carving out the assets, we are pleased to announce the operational launch of TOTEM. The towerco, which currently has 26,000 sites split across France and Spain, aims at being a leading player in the digital infrastructure space. 

 

Our assets are unique and in high demand. Already, we have achieved 15-30% colocation of our assets in France and Spain and we expect to drive additional growth and reach 1.5x of tenancy rate by 2026.

 

We now have the team behind TOTEM in place with just under 200 people employed by the company. Our central TOTEM Group has a core team of 20 people, whilst we have 100 employees working for TOTEM France (our French operations are headed up by Thierry Papin) and 55 for TOTEM Spain (with our Spanish operations led by Patrick Farges). The TOTEM team is highly skilled and experienced in network design, deployment and management. 

There are no shared functions between TOTEM and Orange, they are fully independent entities, with TOTEM holding all capabilities in-house. Our company identity is very much built upon autonomy. 

 

Our independence is first underpinned by a separate legal structure. The management of TOTEM is completely independent from the management of Orange’s retail arm. In addition, our board of directors comprises of two independent board members to drive operational excellence alongside other Orange Group directors, whose appointments are imminent. 

There are a total of 26,000 sites in TOTEM’s perimeter – this breaks down to 18,500 sites in France and 7,900 sites in Spain. In France, 58% of sites are ground-based towers, 30% are rooftops and 12% other special structures, whilst in Spain there is a 50/50 mix of ground-based and rooftop sites.

 

The tenancy ratio across our portfolio is currently at 1.3x, with France in particular having a low tenancy ratio compared to other geographies. This, coupled with the high demand for our sites, provides us with a great platform for growth as we target a tenancy ratio of 1.5x by 2026. 

The MSA in place with Orange reflects industry best practices. The contract has a 15-year duration with two subsequent renewal periods of 10 years. The contract is inflation linked with a 0% floor and no cap.

 

No sites are ringfenced by Orange, instead we have a limited number of strategic high value sites which have their own specific pricing should other customers wish to use them.

 

There are no anchor tenant discounts in place, with historic customer lease rates remaining unaltered by the addition of further tenants.

This situation is different between France in Spain; In Spain, we provide power to our tenants, whilst in France we do not. In France, Orange is responsible for managing its own grid connection, this is due to the company having both fixed and mobile sites in the country. In Spain, we do provide power of which 100% comes from sustainable sources – primarily through green PPAs although we do also have a couple of sites powered by solar. As a company, TOTEM is very engaged in reducing its carbon emissions and we are currently working to ensure that energy for our own needs also comes from sustainable sources.

Overall, by 2026 and to reach our 1,5x tenancy ratio, we plan to host at least 7,000 new emission points, of which a minimum of 2,200 shall be new sites built for Orange on the basis of contractual commitments included in our MSA, increasing to 3,000 sites by 2028. We are targeting 5,000 new emission points for other customers in our existing portfolio of sites. Given the lower tenancy ratio and the larger tower portfolio in France, we anticipate that this will be weighted towards the French market.

Nothing is off the table in terms of digital infrastructure hosting and we will continue to listen to our customers to understand the type of solutions they need from us. We will look at in-building solutions, connectivity along transport routes, antenna-as-a-service, network-as-a-service; wherever infrastructure sharing is required we will be there. We are already engaged in some exciting projects including a major project in Paris, and we plan to work on the Olympic Games infrastructure.

As previously stated, there is the potential to incorporate further Orange assets into TOTEM. At the moment, we are undertaking the preparatory work to look at including other assets from Orange’s footprint.

When it comes to M&A, all I can say is that everything is on the table and we would explore whatever opportunities that are value driven for our shareholders and would position TOTEM as a leader in Europe.