The German telecommunications company Deutsche Telekom is analyzing different possibilities to sell a stake, whether majority or minority, in its telephone tower business.
The The company is analyzing various plans presented by financial and corporate investors, who approached the company with purchase offers, according to the British news agency Reuters.
The investors, among whom are the Vodafone’s tower unit, Vantage Towers, and a group made up of KKR and GIP funds, submitted proposals to acquire 51 percent of Deutsche Funkturm GmbH or buy a minority stake in the business.
The deal, valued at almost 19.6 billion dollars, also sparked the interest of the Spanish wireless telecommunications services and infrastructure company Cellnex and the US real estate investment trust American Tower Corporation.
The Spanish company, advised by JP Morgan, is only analyzing an operation that grants it majority control of Deutsche Funkturm. It does not seek to become a financial partner of Deutsche Telekom through a minority stake.
Both the German company and Vantage Towers, Cellnex and American Tower refused to give statements. KKR and GIP did not speak either.
Assets linked to infrastructure rise of communications: Deutsche Telekom
The German telecommunications company hired the investment banking group Goldman Sachs to carry out a total or partial sale of its towers, trying to take advantage of the high demand for infrastructure assets and the high valuations of the sector that would allow it to reduce its debt.
The turnover of the Deutsche Funkturm business increased by 5.4 percent year-on-year, reaching to 1.2 billion dollars last year.
Operating profit, meanwhile, grew more than 6 percent to 650 million dollars.
Although the CEO of Deutsche Telekom, Timotheus Höttges, initially stated that he was seeking to “deconsolidate” the business, which he managed na more than 40,500 towers in Germany, the company could still end up deciding on a minority sale to a financial investor with the aim of obtaining short-term value.
Nothing is resolved yet.
“They still have to determine which is the best option,” said one of the anonymous sources consulted by Reuters. “A minority sale remains an attractive option, due to the difficulties of achieving consolidation in this sector.”
Deutsche Telekom AG is a Bonn-based company.
It is the largest company in the countries of the European Union that provides telecommunications.
According to the Forbes Global 2000 index, Deutsche Telekom is ranked 79.
The problem of the regulators
The German company seeks to reach to an agreement in mid-2022, although talks could continue until a few months later, depending on how complex the operation is.
Deutsche Telekom has not yet set a deadline for final proposals , since the benefits of each proposal are still being analyzed.
Any merger with another company active in the country, such as Vantage Towers, would instantly trigger an extensive regulatory evaluation process.
The multinational telephone operator al Vodafone, which owns 81 percent of Vantage Towers, is trying to close a union between Vantage and Deutsche Funkturm, or with Totem, the tower business of the French multinational telecommunications company Orange, and has so far rejected the interest of financial investors. .
Vantage Towers went public on the Frankfurt Stock Exchange early last year.
In any case, the potential merger between Vantage Towers and Deutsche Funkturm it would need a series of solutions that contain the sale of assets to obtain the approval of the European regulators.
For Deutsche Telekom the business in the United States is key and it could be interested in adding cash to invest in that market.
Last week it became known that it had raised its stake in T/Mobile US to 48.5 percent, after buying shares from SoftBank for US$2,450 million, which brings it closer to having the majority of the shares.
The German firm, in which the German state owns 30 percent, paid these days a dividend of 0.65 euros per share payable in 2021.
Deutsche Telekom shares are now trading above 17.3 euros, their highest value since the third quarter of the last year.
Sale of assets
Telephone operators are treading the accelerator in the processes of commercialization of infrastructure assets, among which are the telecommunications towers and the fiber optic network.
Telefónica de España, for example, came off the year history of the set of Telxius towers.
It also sold different percentages of participation in fiber optic networks in Germany, Brazil and other Latin American countries.
Vodafone, for example, placed a good part of the capital of Vantage Towers last year. And Orange has been grouping its assets in this business segment in France and Spain in the Totem company.
In the same way, Hutchison delivered its tower assets in the countries of the European Union to Cellnex. The operation was carried out for almost 11 billion dollars.
Although Telekom is looking for buyers, everything indicates that it is thinking of selling its towers poorly. Industry analysts say that if the offer they receive does not convince, they will look for other options or simply give up.
At the beginning of 2022, Deutsche Telekom left the door open for a potential merger of its tower business with that of Vodafone or Orange. Nothing is said.