July 14, 2022
Confirmation yesterday by Spain's Cellnex Telecom that it was no longer in the running for a stake in in GD Towers, which manages Deutsche Telekom's tower assets in Germany (via Deutsche Funkturm) and Austria (Magenta Telekom Infra), has proven significant in the eventual outcome of the long-running bidding process.
Cellnex had mounted a joint bid with Canadian investment company Brookfield Asset Management, with the latter – according to some reports – apparently open to submit another bid if Cellnex pulled out. This turned out to be true.
Deutsche Telekom announced this morning that it had accepted a joint bid from Brookfield and US private equity group DigitalBridge – also mentioned as an interested party earlier on in the bidding process – for a 51% stake in GD Towers.
Figure 1: (Source: Deutsche Telekom)
The transaction, which Deutsche Telekom expects to close before the year is out, implies a €17.5 billion (US$17.52 billion) enterprise value for GD Towers on a cash and debt-free basis.
From the outside looking in it seems the deal was submitted and accepted relatively quickly if media reports were correct that a KKR-led private equity consortium was the only remaining bidder just a day or two ago.
Brookfield may well have had its bid with DigitalBridge pre-cooked, of course, in the event Cellex pulled the plug.
Money, not control, the priority?
Deutsche Telekom CEO Tim Höttges has often appeared ambivalent about the importance of retaining control in GD Towers, and much more interested in securing a deal that he thinks reflects the true value of the tower assets (around 33,000 sites in Germany and 7,000 in Austria).
From prepared remarks, Höttges seemed happy enough. He talked effusively about "crystallizing the value" of GD Towers, along with a "further value upside" from retaining a 49% stake.
In the small print, however, Deutsche Telekom pointedly notes it has the "right to regain control and reconsolidate GD Towers in the future."
Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading. As for the transaction value, noted Deutsche Telekom, it represents an "attractive multiple" of 27 on the basis of dividing enterprise value by adjusted earnings before interest, tax, depreciation and amortization (EBITDA) after leases (AL) for FY21. Deutsche Telekom said proceeds of the sale will be used to reduce debt and increase its stake in T-Mobile US. Telekom Deutschland and Magenta Austria will apparently "continue to enjoy unconstrained access to the passive mobile infrastructure of GD Towers via favorable long-term [around 30 years] lease agreements. GD Towers' CEO and CFO, Bruno Jacobfeuerborn and Thomas Ried respectively, are expected to keep their current jobs once the transaction is completed. — Ken Wieland, contributing editor, special to Light Reading
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