Vantage inks the deal it needed with Germany's 1&1

Vantage Towers has inked a deal with 1&1 that will see the telco use as many as a quarter of its towers in Germany.

The passive infrastructure specialist is on a mission to increase its tenancy ratio following its spin off from parent Vodafone and listing in Frankfurt in March. The deal with 1&1 will give it a boost on that score in its biggest market.

1&1, which is working hard to build its position as Germany’s fourth mobile network operator, has committed to using at least 3,800 of Vantage’s sites in the country by the end of 2025, possibly rising to a total of 5,000. The contract it has brokered with Vantage runs until the end of 2040, but comes with the possibility of an extension until 2060. As an aside, those kind of terms illustrate exactly why investors are so keen on the towers space and its predictable, long-term returns.

“With Vantage Towers, we have gained a strong partner for the passive infrastructure of our 5G

mobile network,” said Ralph Dommermuth, CEO of 1&1. “By cooperating with established tower companies, we want to primarily use existing antenna sites. This is environmentally friendly, conserves resources and at the same time accelerates our rollout,” he said. To put that in slightly more straightforward terms, it’s a whole lot cheaper and faster to use existing towers than it is to build your own, especially when you’re a market newcomer.

1&1, an MVNO-turned-MNO, which picked up north of €1 billion worth of spectrum in the infamous 2019 German 5G auction, is working with big names in the Open RAN space, like Rakuten and Altiostar, to build out its greenfield 5G towers. But it can only virtualise so much; it still needs physical towers.

Around this time last year, Vantage Towers’ chief executive Vivek Badrinath highlighted the importance of the German market to his company’s growth plans, mentioning both the established operators working to expand their 5G coverage and the new arrival; there’s every chance it has been working on this deal for some time.

Indeed, when Badrinath presented Vantage Tower’s first-half results in November he pointed out that Vantage had “increased tenancies at pace in the recent months and signed promising new partnerships.” It’s highly possible that the 1&1 deal was already in the bag then.

At the end of 1H Vantage Towers 19,400 macro sites in Germany, giving it a number two market position, and a tenancy ratio of 1.22x. That’s more sites, but fewer tenancies than it has across the rest of its European footprint, hence the growth opportunity. At group level, Vantage is shooting for 1.5x in the medium term, although it has not specified exactly what that timeframe means. Its ratio is already above that level in its other major markets of Spain and Greece.

“The agreement with 1&1 underpins confidence in the Company’s ability to deliver at the upper end of its medium-term targets,” Vantage Towers said, in a statement. “In particular, the Company’s mid-term tenancy ratio target of >1.5x is now highly secured as a result of the additional 3,800 tenancies contracted with 1&1, delivering increased revenue growth visibility for the Company.”

Meanwhile Badrinath, never one to give much away, described the deal as “another important milestone” for Vantage, noting that it “demonstrates our ability to attract exciting organic growth opportunities.”

Exciting is a subjective word, but this is exactly the kind of growth opportunity Vantage has been seeking since its inception.