Canadian Pension fund OMERS have been interested in Australian towers for a while. Kevork Sahagian, Managing Director, OMERS Infrastructure noted that “Connections (which includes towers) is one of five investment themes that are driving the OMERS Infrastructure transaction strategy globally. The key idea behind the ‘Connections’ thematic is centered on the growing importance of ‘connectivity’ for people, goods, and technology.”
Following unsuccessful bids on the Optus and Axicom portfolio’s that were sold in 2021 and 2022 respectively, OMERS achieved its ambition in May this year as it came to a bilateral agreement with TPG Telecom to acquire their 428 towers and 809 rooftop sites for US$674million., The towers, which are primarily located in urban locations were valued at an EV / EBITDA of 32.1x, in line with the Telstra and Optus sales and attractively priced vs. the recent NZ transactions.
The portfolio represents 21% of TPG Telecom’s total mobile network footprint, the remainder of which is owned and operated by other tower companies. 120 of the sites are in non-metro regions where TPG are working on finalising a multi-operator core network agreement with Telstra. TPG will come off these sites once ACCC approval is received.
TPG signed a 20-year MSA contract as anchor tenants at the sites, with the option for an extension included.
Shortly after, OMERS announced an acquisition of independent Australian towerco Stilmark, who manage a portfolio of ~100 sites in the country but, according to Kevork, “brought together a very talented and experienced group of people and a fresh approach to provide a leading capability to the Australian tower sector.”
In response to TowerXchange’s enquiries, Kevork Sahagian confirmed the TPG tower and rooftop portfolio (which closed in July 2022) and Stilmark (closed August 2022) will now be combined and operate as a new entity called WaveConn.
OMERS and Stilmark had been working together as part of the Symphony Consortium, which Kevork said “was formed was formed over two years ago to provide a compelling and differentiated proposition to the country's MNOs, as their assets came to market.”
Kevork was also keen to highlight that “Waveconn is the largest mobile tower company in Australia that is free of any direct or indirect MNO ownership.”
Now the two deals are closed, TowerXchange caught up with Russell Stanners, who has led Stilmark since 2020. We talk about the two ambitions that gives the firm its new name: how it will make waves in the Australian towerco market, and how it will support connectivity across the country.
TowerXchange: Can you tell us about the history of the Symphony Consortium, and how it has led to the formation of Waveconn?
Russell Stanners, CEO, Waveconn: To bid for the Optus Towers, Stilmark came together with OMERS. Clearly we were a strategic operator and they selected us because we had market leadership in terms of how we had set up our systems and processes to run tower portfolios. We combined this with a modern, agile way of building towers so they would be able to deliver new builds to market at prices and speeds that were significantly better than the benchmark at the time.
As an organisation we are only five years old. Not coming from a traditional MNO background has given us the freedom to build a digital agile business model with a core of very experienced, capable people supported by a great set of processes. OMERS were also impressed with the way we work collaboratively with our key strategic partners.
We worked together as part of the Symphony Consortium to bid for the Optus portfolio and we came a close second to AustralianSuper.
After the Optus towers were sold, our relationship with OMERS ended. They OMERS were looking at the Axicom sale very closely and eventually closed the deal with TPG Telecom in May 2022.
This left them with a build versus buy decision: Do we build our own team or do we look to buy the best team in the market, whom we have experience working with? They decided on the latter.
It made sense for us as well. Stilmark was a great business but had two major challenges: achieving scale, and finding a shareholder who was prepared to invest at scale in order to grow into the new market as it transformed.
This has led to the formation of Waveconn. The name comes from combining our willingness to make waves in the industry, with our focus on improving connectivity using towers and beyond.
Where do you see Waveconn fitting in to the Australian towerco ecosystem?
The Stilmark team were pioneers of the Australian towerco ecosystem and will continue to be so under the Waveconn brand. As an example, it was Stilmark that brought the Effective Sale Area (ESA) model to Australian towers – whereby MNOs are charged by the space they use, factoring in structural and wind loading, rather than the specific equipment they install. After initiating this leasing model, it is now the standard for all three MNOs.
We will continue to push the boundaries of the core tower business. Not being owned by an MNO will be an advantage here, as it drives us to be true neutral hosts, and create value for tenants. We will also explore adjacent digital infrastructure such as small cells, fibre and Edge Compute.
This is another reason why we are so happy to be partnering with OMERS. When moving into these adjacencies, it is so helpful to have a shareholder that can share knowledge and guidance from other investments in digital infrastructure.
Can you introduce us to the rest of the Waveconn management team? Who do TowerXchange subscribers need to know?
Stilmark’s two founders, John Piper and Dugald Glasgow are long time industry leaders in building towers and managing property portfolios.
While Dugald and John brought industry expertise, Steve Butler, the founding CEO, was very good at bringing together the necessary capital backing to take the business forward. James Lamb, our Executive Director for Infrastructure comes from a commercial background having spent time at Port Jackson Partners. Grant Stevenson has had leading finance roles at Vodafone and Hutchinson globally.
Damien Dagleish, has over 30 years' experience in the telecommunications industry and is another important member of the team as our deputy director for infrastructure.
We've got world class people right across the board. In total our team is only 30-35 people and it's a mixture of people with deep industry experience and experience of the new world of digital businesses and agile working.
I think that's what sets our business apart.
This is only possible with our dedication to strong partnerships with a number of key partners. We work with them to build and manage our towers and if we were all together in a room, I’d challenge anyone to tell us apart.
How will you maintain that agile way of working and the focus on efficient processes as you grow from ~100 sites to 1400?
It starts with the management team we have in place. Part of the reason why I joined Stilmark was because the scale up process had already begun in preparation of making an acquisition of one of the available tower portfolio’s.
When you look at how we build towers, we can easily scale this to hundreds of towers per annum because both the systems and processes are designed for that scale already.
This gives us great confidence in taking on the TPG towers onto our platform.
We drive everything off a centralized core and have our guys in the field use their phones to enter quantitative, qualitative and visual data, but transforming this into digital twin technology is something we are currently exploring.
Creating a virtual model of our network will add even more value, so we are very excited about this next step. The technology is fantastic, the challenge is to cost effectively establish and maintain the Digital Twin model. We will be driven by our customers' demands and the value these digital models can deliver to them.
Having modern integrated core systems to begin with materially enables the building of a digital twin model.
We’d aim to tightly integrate these two systems so our staff will continue to update data once, as they currently do, and this will automatically update the digital twin.
How will having OMERS as a shareholders open up new opportunities for Waveconn compared to your previous shareholders, and what would be your advice for a start-up towerco in terms of the profile of investor they should look for?
First of all, I’m keen to emphasise that the investors the team brought on board from the start were the right ones for that time. Back then, all of the towers in the country, with the exception of the 2,000 owned by Axicom, were still in the hands of MNOs. Stilmark were pioneers of the neutral host model, and begun competing for business with Axicom to builds new sites from all operators in the market.
The business plan was to grow rapidly through acquiring these build to suit contracts, however about 18 months ago when the MNOs began to divest their towers, this had to change. All the operators included their new site requirements in the deals, so our organic growth opportunities dried up.
The only way to achieve scale in Australia was to be a part of one of these acquisitions, and that’s what we have been able to achieve, by working with OMERS.
If I was speaking with someone looking to start a new towerco, I would recommend partnering with long term investor with long-term outlook and the willingness to fund acquisitions that can achieve scale.
You mentioned that Waveconn will be focused on digital infrastructure beyond towers – what are some of the immediate opportunities for the Australian market?
Operationally, we need to bring the TPG portfolio onto our platform. Following that, we will be focused on co-locations and then the build program for 252 new sites that we have contracted with TPG. We do see some scenarios around active sharing where it makes sense to move up the value chain, and we also see opportunities in small cells and eventually edge computing down the line.
This will be part of our commercial development focus, and we plan to be very active exploring these opportunities with our customers.
When it comes to active sharing, we see this happening now between Australia’s MNOs. There is certainly an opportunity for towercos to move up the value chain here and own the equipment as a neutral host, like how we own towers.
If this model takes off at scale, it offers us a new way to support MNO network rollout deeper and faster with less capital investment. That’s good for them, and it’s good for us.
A big part of that will be timing because a lot of the decisions have already been made on the 5G round of upgrades. 6G might be the right time to do this next step
Likewise, I think for Australia particularly, there's a lot of work going on at the state government level to make rollout in rural areas more efficient and to ensure that rural populations don’t suffer from blackspots.
So it is an interesting space for us to watch.
If you want to learn more about Waveconn, you can meet Russell and the Waveconn team at TowerXchange Meetup Asia, 29-30 November at Marina Bay Sands in Singapore. Check out the agenda and register today!
