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5G

EC clears Inwit tower deal, Vodafone banks €2.14B cash windfall

Vodafone's top brass no doubt breathed a sigh of relief after the European Commission (EC) gave approval to a merger in Italy with Inwit, the passive tower infrastructure arm of incumbent Telecom Italia (TIM).

Nick Read, Vodafone CEO, has long been cajoling shareholders and investors that there's plenty of value just bursting to be unlocked in the Group's tower portfolio: Events in Italy appear to bear this out.

A merger of Vodafone Italy's tower assets with Inwit, expected by the end of this month following the EC's green light, will see Vodafone's balance sheet bolstered to the tune of €2.14 billion (US$2.44 billion) in hard cash.

Under the terms of the arrangement Vodafone will hold a 37.5% stake in the new entity, the same as TIM's: The rest of Inwit's shares will remain listed on the Milan Stock Exchange. The upshot is Europe's second-largest listed tower company with more than 22,000 towers: Cellnex, which boasts more than 50,000 existing and planned sites, is the largest.

The proposed Italian tower merger experienced a bit of a bumpy ride before eventually getting the thumbs-up from Brussels. Benedetto Levi, CEO of smaller rival Iliad Italia, complained that network sharing on this scale would be bad for competition. Subsequent reports, which turned out to be correct, said Vodafone Italy and Inwit were willing to offer others access to their infrastructure to allay anti-trust concerns.

Vodafone and Inwit, following what they called "constructive talks" with the EC, committed – evidently as a condition for securing regulatory approval – to make space available to third parties on 4,000 of its towers in more urbanized areas. It also pledged not to turf out existing tenancies.

Inwit implied that these commitments were not really any skin off its nose since they "maximized" tower utilization and preserved the ability of Vodafone and TIM to "efficiently roll out their respective 5G networks."

The EC further confirmed its support for Vodafone Italy's and TIM's plan to share active network equipment outside of major cities. The selling point of such an arrangement, as presented by the two companies, is that they can deploy 5G faster and over a wider area, while at the same time lowering costs and softening environmental impact.

As large as the new-look Inwit is, Read has something much bigger in mind to unlock shareholder value from the operator's tower assets. The CEO recently claimed that TowerCo, a separate holding company for Group's entire tower assets in Europe, remained "fully on track" to become operational in May 2020. One of the TowerCo monetization possibilities Vodafone is looking at – if market conditions cut the mustard – is an IPO, perhaps some time in early-2021.

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— Ken Wieland, contributing editor, special to Light Reading

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