Altice to Sell French, Portuguese Towers for €2.5B

European service provider enters agreements for the sale of stakes in its French and Portuguese tower companies.

Iain Morris, International Editor

June 21, 2018

3 Min Read
Altice to Sell French, Portuguese Towers for €2.5B

Altice Europe is selling stakes in its towers businesses for the sum of €2.5 billion (US$2.9 billion) in an effort to reduce debts and open up new revenue streams in future.

The service provider, owned by French-Israeli billionaire Patrick Drahi, has entered into an "exclusivity agreement" with KKR, an investment company, for the sale of a 49.99% stake in its French towers business.

It has also agreed to sell a 75% stake in its Portuguese towers business to a consortium that includes Morgan Stanley and Horizon Equity Partners.

The moves are aimed principally at reducing Altice Europe's net debt, which stood at about €31.3 billion ($36.1 billion) in March, or 5.5 times what the operator makes in annual earnings.

With most of Europe's big telecom incumbents reporting net-debt-to-earnings ratios of between two and three, investor concern about Altice's debt position has previously weighed heavily on the company's shares.

Altice has already spun off its US business and shifted its focus from acquisitions to operational improvements. The sale of assets is a third pillar of its strategy to improve its financial position. (See Altice Hails French Recovery as Earnings Rise, Altice Spins Off US Biz, Rejigs in Europe and Altice Shifts From M&A to European Recovery.)

The deal for the French towers business, which is to be called SFR TowerCo, would include 10,198 sites and values the company at about €3.6 billion ($4.2 billion).

That valuation is 18 times the company's estimated earnings for 2017, reflecting a healthy appetite for certain types of European telecom asset in the investment community.

Last month, Richard Warley, who heads up the European business of US telco CenturyLink Inc. (NYSE: CTL), said valuations in the sector were at historically high levels as infrastructure investors shifted their focus to connectivity and digital assets. (See CenturyLink May Jump Into Europe's Merger Mania.)

Such infrastructure funds have traditionally been willing to accept a lower rate of return for stable revenues. "Lower rates of return translate into higher valuations," Warley told Light Reading.

In Portugal, Altice will sell a majority stake in a business comprising 2,961 towers. That deal values Towers of Portugal, as the new company will be called, at an enterprise value of €660 million ($761 million) -- as much as 18.9 times estimated earnings for 2017.

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Both tower companies will continue to serve Altice's subsidiaries while also renting capacity to other mobile operators in the French and Portuguese markets.

The timing of the move looks auspicious with the forthcoming rollout of 5G services and the "densification" of mobile networks this will entail.

"We will create a leading European tower business, including the number one in France," said Patrick Drahi in a statement. "Both tower businesses will be uniquely positioned to grow as they provide increasingly important infrastructure services to operators in both markets."

"Simultaneously, these transactions underline our commitment to delever and proactively manage our balance sheet while highlighting the significant value of Altice Europe's business," he added.

Independent towers companies in the US market have been growing fast amid soaring adoption of mobile data services, and with some US telcos pursuing a more asset-light approach.

Crown Castle International Corp. (NYSE: CCI), one of the biggest towercos, reported 5.5% growth in organic site rental revenues in the first quarter, with overall sales rising 35%, to $1.15 billion, thanks to takeover activity.

— Iain Morris, International Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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