Less than two weeks after the resignation of long serving CEO Tobias Martinez, rumors began circulating on Friday that American Tower and Brookfield were preparing for a takeover bid of Europe’s largest tower company.
Cellnex’s stock price jumped 10% before the weekend following reports from Spanish outlet Okdiario that both Goldman Sachs and Morgan Stanley were advising the towerco on a deal that could be worth up to 50billion euros. While Okdiaro does not have the best track record on reporting such news, Cellnex’s new focus on refinancing coupled with private equity and pension funds significant appetite for tower assets means it would not be unlikely for the company to attract some level of interest.
It has been disputed that a bid is even being prepared, with finanzas.com citing sources that deny a bid is even being prepared and deny Cellnex’s recruitment of those same advisors reported by Okdiario.
Cellnex, American Tower and Brookfield all declined to comment when TowerXchange approached them.
Either way, the industry's analysts have weighed in heavily on the speculation around whether a merger that would significantly consolidate the European market would be approved and whether the deal would make sense for Cellnex, American Tower or Brookfield.
The regulator
Observers have stated that one significant hurdle faced by ATC and Brookfield would be the sheer size of the merged entity. Cellnex operates 104,808 towers in 12 markets in Europe, while American Tower operates 30,308 in Spain, France, Poland, Germany.
If the two tower portfolios were combined, anti-competition concerns could arise due to the market share of the new portfolio in Spain and France, but American Towers presence in Poland is in the lower double digits and Cellnex does not operate in Germany. Between them ATC and Cellnex would own close to 50% of sites in Spain and France if their portfolios were combined.
Jefferies and Bloomberg have also pointed to conflicts of interest on Brookfield’s behalf that could scupper a takeover. Brookfield partnered with Digital Bridge to acquire 33,000 sites in Germany from GD Towers, and analysts have suggested that antitrust issues could easily arise as a result. Brookfield also invest in towercos in Sweden, Finland and Norway as well as the UK and Ireland, through their partnerships with Telia Towers, and WIG.
Brookfield owns a 49% stake in Telia Towers in Sweden, Finland and Norway together with Swedish pension fund Alecta. Telia Towers Sweden owns 1,600 towers and Telia Tower Norway owns 1, 100 towers, the latter having plans to build more sites this year to address rural coverage.
Brookfield also owns a 45% stake in TDF in France which it’s looking to sell, having previously attempted a sale in 2019 and 2021. TDF owns 7,785 towers in France.
Figure 1 – ATC and Cellnex presence in European markets and combined market share
Market |
ATC |
Cellnex |
Combined Market Share |
Austria |
|
4,516 |
24% |
Denmark |
|
1,502 |
15% |
France |
3,997 |
24,015 |
50% |
Germany |
14,759 |
|
19% |
Ireland |
|
1,890 |
33% |
Italy |
|
20,921 |
43% |
Netherlands |
|
4,075 |
29% |
Poland |
51 |
15,199 |
53% |
Portugal |
|
6,086 |
43% |
Spain |
11,579 |
10,420 |
57% |
Sweden |
|
2,791 |
20% |
Switzerland |
|
5,397 |
47% |
UK |
|
7,996 |
21% |
Precedent has been set in Europe for an acquisition to go ahead even with market share concerns from regulators. At the end of 2022 Cellnex announced the completion of an acquisition of CK Hutchison’s tower assets in the UK. Cellnex were required to downsize its current portfolio for the deal to be approved and WIG ended up acquiring 1,100 towers from Cellnex UK. As part of the deal, Cellnex plans to build a further 600 new sites in the UK over the next eight years.
Speaking with TowerXchange, RBC Capital Markets Analyst Bora Lee commented that “based on our reading of the French regulatory review of Cellnex’s Hivory acquisition, we believe Cellnex has room to make further acquisitions in France for urban towers (albeit, not rooftops) and in suburban markets”
In Spain however, the 57% market share of a merger ATC/Portfolio “could potentially necessitate remedies” Lee continued.
Would a deal make sense?
Another stumbling block for a potential deal could be the price tag. Finanzas report that American Tower would struggle to win over Cellnex’s diverse shareholders, who were more likely to want to sell at around €50 per share, compared with Cellnex’s current share price, which is just above the €36 mark (€33 on Friday).
Okdiario values Cellnex at up to €50 billion, including debt. This is an eyewatering number even for a company like American Tower, particularly given it has an eye on maintaining its investment grade rating, something Cellnex is also aiming to attain. Wells Fargo analyst Eric Luebchow is skeptical that a deal would go ahead, and wrote in a note that a deal to buy Cellnex would “be a substantial equity check for AMT to write that would increase leverage and slow organic growth”.
Lee explained to TowerXchange that “the transaction could make strategic sense for AMT, but note that its management reiterated at an industry conference earlier this month that M&A, to the extent it occurs, is more likely to be of a tuck-in nature.” Lee echoes Luebchow’s thoughts and is skeptical an American Tower takeover would go ahead.
In addition to its comments on M&A to the contrary, Luebchow notes that American Tower has stated its intent to start de-leveraging its balance sheet. An acquisition of Cellnex is more likely to increase its leverage to about 5.8x, while the target is to reduce to 5x.
Brookfield, however, could be a potential suitor. Investment firms have a keen interest in tower assets globally, the most recent example being KKR and Global Infrastructure Partners (GIP) for Vodafone's majority stake in Vantage Towers.
In addition, many of the larger APAC deals in the past couple of years have been driven by financial sponsors
Lee notes that “Brookfield and its affiliates’ current portfolio include minority stakes in French towerco TDF which multiple media channels (e.g., Bloomberg) have reported it is seeking to sell.” and considered the Canadian Private Equity outfit to be a far more logical participant in the bid.
In addition to the over 100,000 towers that Cellnex currently operates across the continent, there are 6,969 DAS nodes and small cells that it operates and expects demand for DAS to grow.
Cellnex has announced plans to roll out 21,000 towers up to 2030.
At the end of 2022, Cellnex was awarded six projects by the European Commission (EC) to enhance 5G infrastructure along transport corridors on the continent, starting with linking Spain with France and Spain with Portugal.
To achieve this, the towerco has announced plans to deploy 34 new telecommunication sites (including DAS in tunnels) where it plans to work with MNOs using its neutral host model.
These projects commence in January 2023 and are expected to be completed by December 2025 with an approximate investment spend of €24m. 50% of the funding for them comes from the EC.
The projects are within the EC’s objective to have uninterrupted 5G connectivity for road safety services, and to provide connectivity services to passengers along these corridors in the member states.
The EU has announced plans to create 5G connectivity in transport corridors in other parts of the continent within its Digital Decade strategy, such as the Aurora Borealis between Finland and Norway.
Given the scale of Cellnex’ assets and activity, it would make sense there to be more than one entity involved in attempting to acquire them. Buying a company that already has such a big footprint on the continent could bring a shift in the European market structure with potentially a private equity fund getting a big slice of it.
What will come of the speculation remains to be seen, but what is certain is that you can meet American Tower, Cellnex and Brookfield at TowerXchange Meetup Europe on 16 and 17 May at the Business Design Centre in London. Register and find out more here
