Despite being one of the first tower markets in Europe in 2008 after KPN divested its assets in four tranches, M&A and tower activity in The Netherlands has been limited in the past few years. Today’s announcement from MNO KPN and pension fund ABP reshapes the country’s tower market. The MNO and pension fund have signed an agreement to combine assets to put the Netherlands back in the spotlight.
The deal
The new towerco will manage approximately 3,800 sites representing the consolidated passive infrastructure of ABP-majority owned Open Tower Company (OTC), consisting of high voltage pylons, broadcasting and macro towers and KPN’s rooftops, macro sites and third-party towers. The deal also rationalises the stake of NOVEC, a towerco part-owned by the Dutch electricity grid. In addition, the towerco will add new sites for KPN in an agreed Build-to-Suit (BTS) commitment bringing the total number of sites to 4,400 by end 2034.
In this transaction, ABP is represented by its asset manager APG. KPN will hold a 51% consolidating stake in the as yet unnamed towerco and ABP the remaining 49%. OTC’s minority owner TenneT will sell its stake as part of this transaction. The structure can be seen in the accompanying figure.
KPN has agreed an upfront cash payment of EUR120mn to OTC’s minority current shareholders for the stake in the company and the amended lease terms, subject to closing adjustments. On a pro forma, full year basis, the consolidated impact of the transaction on KPN’s 2024 adjusted EBITDAaL would be approximately EUR30mn. On a similar basis, the impact on KPN’s Operating Free Cash Flow would be approximately EUR20mn. The transaction is subject to approval by regulatory authorities.
The deal will enable KPN to gain higher flexibility on a substantial part of its sites and achieve synergies regarding the development, maintenance and optimisation of the network infrastructure. In addition, KPN will reset lease fees on a big part of the tower portfolio and harmonise contracts into a single 20-year MSA covering 60% of the tower and rooftop portfolio, thus achieving operational efficiency. It expects to see EBIDTA increase as a result of financial consolidation and improved operational control.
The relationship between the parties over the years
Starting in 2008, KPN has spun off and sold 601 towers across two deals to OTC, 460 sites to Shere Group and 261 sites to Protelindo. The operator has kept approximately 250 towers and slowly continued building new sites over the years, albeit in the low digits.
In 2017 ABP acquired a 75% stake in OTC for an undisclosed amount from owners NOVEC and Rabobank with NOVEC retaining a 25% share. NOVEC is a subsidiary of Dutch power grid operator TenneT which also manages and leases high voltage electricity pylons.
Commenting on the deal at the time ABP said the telecom sector was attractive as “it offered potential for strong growth and added to diversification within its infrastructure portfolio.”
The attractiveness of telecom infrastructure has not subsided since despite unfavourable macro factors on the continent including increased maintenance, build and upgrade costs.
In a statement following today’s announcement, the current ABP Board chairman Harmen van Wijnen said “Through this collaboration with KPN, we are strengthening the Dutch mobile networks. At the same time, this investment yields an attractive return, which makes this collaboration significant for our pension participants in several areas. In this way, we are not only building a good pension, but also good mobile and digital accessibility in our country." ABP has further clarified that “over the past 20 years we have achieved an average return of about 6% on an annual basis. Interest rates are expected to rise in the coming years. If that happens, it will lead to relatively lower returns on investments. In such a scenario, ABP's average return will be around 4.5%. “
KPN has said in a statement “Following ongoing demand for network growth and densification, increasing direct exposure to Dutch passive telecom infrastructure is strategically imperative for KPN. This strategic partnership is in line with KPN's ‘Connect, Activate & Grow’ strategy to optimise the value of its passive infrastructure assets and retain strategic flexibility.”
The Dutch market deal dynamics
In addition to the KPN and OTC deals, the Dutch market has seen local Protelindo’s and Shere Group sites acquired by Cellnex in 2016. In 2017 Cellnex acquired small towerco Alticom and its 30 long range towers for EUR133mn. In January 2021, Deutsche Telekom and Cellnex signed a deal to merge their Dutch tower businesses into Cellnex Netherlands BV whilst both becoming anchor investors of a new investment fund - Digital Infrastructure Vehicle. Digital Infrastructure Vehicle holds a 38% stake in Cellnex Netherlands as a seed asset (with Cellnex holding the remaining 62% stake).
TowerXchange estimates that at present the infrastructure managers of the mobile networks connecting the 17-million population of the country are as follows:
