Cellnex Telecom’s freedom to roam Europe may be coming to an end. Spurred by the rise of the telecommunications tower operator, Vodafone is preparing to list its corresponding unit early next year. Other European rivals are also separating their infrastructure divisions. With half of Europe’s 700,000 mobile phone towers still up for grabs, Spain’s € 25 billion M&A machine faces serious competition.
Since going public in 2015, the Barcelona-based company, specializing in the seemingly monotonous business of installing and maintaining transmitters for mobile phone networks, has pursued an extraordinary career of shareholder-financed purchases. The € 10 billion purchase of 24,600 towers from Hong Kong company CK Hutchison, announced last week, confirmed its position as the main operator on the continent, with a projection of 103,000 sites by 2028.
Investors, especially pension funds eager to ensure long-term stable cash flow, seem happy to continue to pay the bill. Cellnex’s shares have tripled in the last two years.
But all good things come to an end. Cellnex’s business value, which is now 21 times the expected EBITDA for next year, 1.2 billion euros, has drawn others into the game. Valued at the same multiple, Vodafone’s Vantage Towers, which will have 68,000 towers when listed in Frankfurt in the spring, would be worth more than € 14 billion. Orange, Telefónica and Deutsche Telekom are also separating their infrastructure units.
This should put Cellnex CEO Tobías Martínez on guard. Small mobile operators across Europe still have 350,000 mobile phone towers, according to consultancy TowerXchange. Telekom Austria, Sweden’s Telia and Norway’s Telenor are already creating portfolios that can attract the interest of multiple buyers. One of Vantage Towers’ stated goals is to expand by absorbing the “non-core” assets of other operators.
Cellnex continues to have the advantage of independence, which means that it can add additional tenants to an existing tower without facing accusations that it is favoring its own team. That’s something Vantage can’t do while under the Vodafone wing.
But this extra competition could drive prices up. Each of Hutchison’s towers, for example, cost 35% more than a similar deal from a year earlier. Martinez’s M&A spree should set up some spoilers.