On 14 April, Cellnex reached a deal to acquire 100% of Nos Towering from Portuguese MNO, Nos for an enterprise valuation of €375mn. The deal marks Cellnex’s second major tower deal in the country and adds a further 2,000 towers to their Portuguese portfolio, with up to a further 400 new sites to be added for Nos over the next six years. TowerXchange examines the deal.
Cellnex’s M&A drive across the European market shows no signs of slowing with the continent’s most acquisitive towerco adding a further notch to its belt with the acquisition of Nos’s tower portfolio in Portugal. Announced on 14 April, Cellnex reached a deal to acquire 100% of Nos Towering and its 2,000 towers from NOS for €375mn. 40% of the acquired sites are located in urban areas with 60% across suburban and rural areas. Under the agreement, Cellnex have signed an initial 15-year contract (extendible by successive 15 year periods) for Nos to be the anchor tenant on the sites.
As has been the case with the majority of Cellnex’s most recent acquisitions, the deal also includes a build to suit component with Cellnex anticipating the investment of up to a further €175mn to build up to 400 new sites over the next six years. Speaking to TowerXchange earlier in the year, Cellnex’s CEO, Tobias Martinez said “It is very important to attach these types of build to suit contracts to M&A transactions. Doing a deal is not just about the initial transaction, when you sign a deal you need to understand the future requirements of your customer, in order to become a true partner and work with them to build out and support their networks. It is also important to show the market that you have a clear cash flow and capex plan in line with customer requirements, with the agreements providing significant organic growth opportunities. Such build-to-suit programmes also give you a good opportunity to approach other potential tenants, to discuss the potential for site sharing in order to avoid duplication of infrastructure.”
When all sites are integrated and new sites rolled out, Cellnex estimates that the additional EBITDA generated for the group will be €50mn, with the company’s backlog of future sales contracted to grow by €2bn to €46bn.
Speaking on the transaction, Miguel Almeida, CEO of Nos said “This transaction is an important step in the consolidation of our strategy, both current and future, to invest in the expansion, optimisation and improvement in quality of our data and mobile voice service in the most efficient manner.”
Figure one: Portuguese MNO market share
The acquisition of Nos Towering marks Cellnex’s second tower transaction in the Portuguese market. In January of this year, Cellnex reached a deal to acquire 100% of OMTEL, the 3,000 tower towerco carved out of Altice MEO (in which Altice had previously sold a 75% stake to a consortium of investors including Morgan Stanley Infrastructure Partners and Horizon Equity Partners). When the Nos deal is finalised, and the company’s build to suit commitments (400 new sites for MEO and 400 sites for Nos) are realised, Cellnex’s tower count in the country will stand at 5,800 sites (with the figure currently sitting at 3,011 sites).
Speaking on the deal, Cellnex’s CEO, Tobias Martinez said “The agreement reached with Nos reinforces the nature and the neutral and independent operator profile that characterises the Cellnex model. Following the very recent agreement to acquire OMTEL, also in Portugal, this transaction exemplifies the sense of being an operator which, precisely due to its neutral and independent nature, can consolidate long-term collaboration projects with the various MNOs and telecom operators who access our infrastructures to roll out their telecommunications networks.”
With both MEO and Nos agreeing the sale of their tower portfolios to Cellnex, the sole operator in the market to retain their towers is Vodafone, with Vodafone having announced plans to carve their 3,500 Portuguese sites into their as yet unnamed pan-European towerco.
Figure two: Tower ownership in Portugal
Market dynamics in the Portuguese market
Portugal has a comparatively high tower count for the size of the country with infrastructure sharing in the country having been limited to date, and the tenancy ratio in the country sitting close to one. A variety of reasons have contributed to the limited infrastructure sharing in the country, including the structure of contractual agreements with landlords which have oftentimes eroded some of the benefits of shared sites. The regulator, ANACOM, has however been keen to promote infrastructure sharing in the country and in February, Vodafone and Nos signed a letter of intent to explore a nationwide network sharing agreement (building upon an earlier partnership the two signed in 2017), with negotiations set to be finalised in June.
5G spectrum auctions in the country are imminent. The initial proposed June timelines have slipped somewhat due to the Covid-19 pandemic but ANACOM has announced that the public consultation period regarding frequency allocation will close on 3 July. The rollout of 5G will necessitate overlay on existing infrastructure whilst requiring further sites for densification creating significant opportunities for towercos in the market.
In addition to 5G rollout, Portugal still requires significant densification of 4G networks, with Cellnex referencing the special focus to be placed on rural developments to help overcome the digital divide.
Bolstering their position in the Portuguese market, Cellnex will now be the largest tower owner in the country, adding a further anchor tenant to their client base and positioning themselves for any future growth the country should offer.
Figure three: Cellnex’ history of tower transactions
