CK Hutchison Joins the Mobile Towers Party
With 5G here, hard-pressed operators are looking to their site assets for financial relief.
Investors share their enthusiasm, anticipating growing demand for sites as new networks deploy.
Since January 1, the stock of the world's biggest tower firm, China Tower, is up 41%, while the two largest US players, Crown Castle and SBA, are up 28% and 54% respectively.
Last week Vodafone announced it was spinning off its 61,700 base station sites into Europ's largest tower company. (See Vodafone Shares Soar as It Values Towers Spin-Off at $20B.)
Now CK Hutchison is joining the party.
The company, which holds the Hong Kong conglomerate's port, retail and telecoms operations, has also spun off a dedicated tower subsidiary.
It would be the fourth largest on the continent, behind Vodafone, Cellnex and Deutsche Funkturm, according to figures issued at the company's interim result announcement.
But unlike Vodafone, which is weighing a possible sale or listing, the company says he has no intention of selling.
CKH finance director Frank Sixt declined to estimate its value but reckons that per site it would be "as good [as] or better" than Vodafone's.
The subsidiary, CK Hutchison Networks, will own 28,800 towers in the UK, Italy, Austria, Sweden, Denmark and Ireland.
It would likely add tenants as 5G networks are rolled out and in future might also incorporate Hutchison's 9,300 sites in Asia, Sixt told an analysts' briefing on Thursday.
Consultancy Arthur D. Little is one that has been making the case for MNOs to unlock the value of their mobile towers.
It says that in the past 12 years EBITDA margins have fallen six percentage points and operating free cash flow margin has almost halved. Meanwhile, Europe has 477,000 cell sites, southeast Asia 410,000 and India 460,000.
"For TowerCos all around the globe, there is an untapped site base holding opportunities for several attractive deals," it argued in a recent paper.
But the new tower firm wasn't the only bit of financial reorganization by CK Hutchison this week.
It also announced it is gathering its six European operators and listed Hong Kong cellco into a single unit, CK Hutchison Telecom.
The main reason is to boost the balance sheet so it can refinance €10 billion in debt held by Wind Tre, its Italian subsidiary, Sixt said.
"We will save more than €100 million a year in interest expense for the next seven years," he said.
The reorg will also save backend costs and improve efficiency.
"It puts us in a very good position to be very coordinated in our IT and network transformation activities."
— Iain Morris, International Editor, Light Reading