Towercos are now active in the US, Argentina, Japan and…New Zealand! The towerco fever which took hold in Australia last year has crept across the Tasman Sea to take hold in New Zealand. Spark New Zealand announced on its February 22nd earnings call that it plans to carve out 1,250 of its 1,500 tower assets into a new subsidiary that will be named Spark Towerco.
It also plans to explore the introduction of outside capital, in a model that mirrors Telstra’s tower carve out into Amplitel and Optus’s carve out into Australia Tower Network – two deals that were completed last year.
While Spark confirmed they will commence a process to explore the introduction of third-party capital in the next few months, there is no certainty a transaction will proceed. The Amplitel and Optus portfolios received a lot of interest from international investors and global towercos, and TowerXchange expects that there will be similar interest in the Spark towers.
Spark CEO Jolie Hodson said “Should we choose to introduce third-party capital we will retain a shareholding and remain a key anchor tenant, with appropriate agreements in place on arms-length terms for operations and services.” Spark plan to continue to invest in modernising their mobile network and improving coverage alongside the sale.
Elsewhere in the earnings call Spark announced that operating earnings rose 7.6% in H221 to NZ$538 million (US$363mn), and the company forecast it will achieve full-year operating earnings in the top half of a range of NZ$1.13 billion to NZ$1.16 billion.
The Auckland based MNO has enlisted the services of local investment advisors ForsythBarr and Jarden to run the process of the sale.
More about New Zealand’s tower market.
TowerXchange estimates that there are 4,250 towers in New Zealand that serve 6.4mn mobile subscribers for a Sims per Tower of 1,505. SIM Penetration sits at 125.9%. In addition to Spark there are two other MNOs – Vodafone and 2degrees.
Prior to the announcement from Spark there were early signs of a nascent tower industry emerging in New Zealand. Spark and Vodafone New Zealand have substantial but ageing tower networks and newer entrants 2degrees have leveraged co-location where possible while building a few hundred towers themselves.
2degrees may also have an appetite to sell their towers and partner with a towerco on BTS now a precedent has been set by Spark.
Parallel infrastructure is substantial, while the need for improved rural coverage, particularly on the South Island where tourist and agribusiness drive demand, has prompted the government’s Rural Broadband Initiative (run by Crown Infrastructure Partners) to invest in over 100 towers - particularly along transport routes.
In early 2021, Vodafone New Zealand announced a “turbocharged” digital infrastructure investment programme. The milestone 250th tower was completed as part of this project in June 2021, and was built by the Rural Connectivity Group.
The Rural Connectivity Group is a joint venture run by all three of the nation’s MNOs to develop rural connectivity and eliminate mobile blackspots. The Rural Broadband Initiative has also committed NZD10 million (USD7.06mn) to deploy suitable radio spectrum in more rural areas.
It is expected that this will vastly improve broadband capacity and coverage in the long-term, as the 600MHz band is better suited to 5G.
What this means
While this is good news for investors seeking tower assets in a stable, developed markets and for mobile consumers in New Zealand, the carve-out is also good news for the industry at large. New Zealand is a small market, but one which will benefit from the introduction of the telecom tower model. More proof, if it were needed, that this versatile model will continue to spread around the world.
