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Cellnex emerges as Euro mobile tower power player

Cellnex has become Europe's hottest mobile infrastructure neutral host following an eight-month acquisition blitz that saw it spend more than €6.4 billion (US$7.16 billion) to pick up new assets in seven countries, a move spurred by the potential new business that 5G network coverage and capacity expansion plans will bring.

The latest deal sees the company -- which hosts and manages radio access network gear on behalf of multiple mobile operators in Spain, Italy, the Netherlands, France, Switzerland, the UK and Ireland (including planned sites up to 2027) – enter Portugal for the first time.

Late last week it announced the €800 million ($895 million) acquisition of independent Portuguese towers and sites operator Omtel from Altice Europe (25% stake) and Belmont Infra Holdings (a consortium holding a 75% stake).

Omtel operates about 3,000 passive mobile infrastructure sites (60% towers, 40% rooftops) across Portugal -- about 25% of the country's total mobile tower sites -- and has plans to build out a further 400 sites during the next four years. Its main customer is MEO, Altice Europe's Portuguese operation: As part of the acquisition deal, Cellnex and MEO have struck a long-term deal that includes the construction of up to 350 further sites to meet MEO's needs.

Cellnex is counting on scale and 5G to provide a return on its recent significant investments: 5G will, the company hopes, "require network densification and an efficient roll-out that should allow a neutral and independent operator like Cellnex to propose an attractive solution to mobile operators both in terms of cost and speed of execution."

5G-driven spending spree
The expectation that 5G will drive significant new business for neutral hosts has led to a number of other acquisitions by Cellnex during the past year, helped by the desire of mobile operators to raise cash and focus their operations by offloading their mobile tower assets:

  • May 2019: Cellnex struck a €1.4 billion ($1.57 billion) deal to create a new company that owns and manages Iliad's 5,700 mobile sites in France, with an agreement to build out up to 2,500 additional sites across the country. Cellnex owns a 70% stake in that new company, with Iliad retaining a 30% stake.

  • May 2019: Cellnex also acquired Iliad's 2,200 sites in Italy outright for €600 million ($671 million), with a promise to build up to 1,000 additional sites.

  • May 2019: At the same time, it struck a €700 million ($783 million) deal to take a 90% stake in the company that runs 2,800 sites in Switzerland for mobile operator Salt, and agreed to build up to 500 more sites across the mountainous country.

  • June 2019: Cellnex struck a £100 million (€117 million/$131 million) deal to operate 220 towers for BT Group across the UK for the next 20 years, noting that the deal was a "first step towards potential future industrial cooperation between the two companies."

  • September 2019: Cellnex announced a €210 million ($235 million) deal to acquire Cignal, an independent mobile tower operator in Ireland with more than 540 sites and plans for 600 more sites during the next six years.

  • October 2019: Cellnex agreed to buy the telecoms division of UK-based towers company Arqiva for £2 billion (€2.35 billion/$2.63 billion). The deal, which makes Cellnex the largest owner of UK mobile towers, involves the acquisition of around 7,400 UK sites and the right to market another 900 additional sites. Included in the deal are concessions to use street infrastructure as locations for telecom sites in 14 London boroughs, which Cellnex sees as key to 5G "densification" and rollout.

  • December 2019: Cellnex agreed to buy 1,500 telecom sites -- including towers and antennas in urban, suburban and rural areas -- from Orange Spain for €260 million. The terms of the contract will allow Orange Spain to continue to use the sites for at least ten years.

Previously, in 2017, Cellnex had acquired more than 2,000 sites in Switzerland from Sunrise for about $514 million and struck a $921 million buy-and-build deal covering 3,000 sites with Bouygues Telecom in France.

In November the company -- which also manages inbuilding small cells, provides hosted infrastructure for broadcasters, and runs emergency service networks and smart city/IoT infrastructure -- announced revenues of €753 million ($842 million), EBITDA of €498 million ($557 million) and an operating profit of €131 million ($147 million) for the nine months to the end of September. About 67% of its revenues come from the provision of telecom infrastructure services to mobile operators. Its net debt at the end of September stood at €3.4 billion ($3.8 billion).

Cellnex says the Omtel deal will add about €90 million ($101 million) to its annual earnings before interest, tax, depreciation and amortization (EBITDA) once the Portuguese operation is fully integrated and planned extra sites are built.

Extensive coverage
So how big is the Cellnex empire exactly? Well, at the end of September 2019, it had a total of 27,698 operative sites -- 8,684 in Spain, 8,336 in Italy, 5,260 in Switzerland, 3,343 in France, 919 in the Netherlands, 608 in the UK, and 548 in Ireland -- with a further 1,777 "nodes" (DAS and small cell deployments).

But a number of its recent acquisitions are yet to close, and the company likes to talk about the total number of sites it will have once all its deals are completed and the contracted and agreed site expansions have been built out, because that number is much bigger -- about 58,000 in total, including the Portuguese sites, as the graphic below shows.

Source: Cellnex.  
(1) Up to 58k sites assuming that all sites to be transferred or built under our M&A contracts are actually transferred or built by each relevant date. Excluding sites not owned;  (2) Including c.7,400 TIS sites
acquired from Arqiva and excluding c.900 managed sites;  (3) Including 1,500 sites acquired from Orange;  (4) Including contracted BTS program of 400 sites only.
Source: Cellnex.
(1) Up to 58k sites assuming that all sites to be transferred or built under our M&A contracts are actually transferred or built by each relevant date. Excluding sites not owned;
(2) Including c.7,400 TIS sites acquired from Arqiva and excluding c.900 managed sites;
(3) Including 1,500 sites acquired from Orange;
(4) Including contracted BTS program of 400 sites only.

And once all its deals are completed, Cellnex expects its annual revenues to be around €2.2 billion ($2.46 billion), of which an estimated 85% will come from telecom infrastructure services, making it the largest independent mobile towers company in Europe.

Investors are keen on Cellnex's strategy: Its share price has doubled in the past year (see below) and currently stands at €40.44, giving it a market value of more than €15.5 billion ($17.3 billion).

Source: Google finance.
Source: Google finance.

— Ray Le Maistre, Editor-in-Chief, Light Reading

ReginBrown 3/25/2020 | 5:58:22 AM
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