Vodafone NZ owners look to make money from towers

The telecoms industry’s latest towers transaction is underway in New Zealand, where investors have confirmed the sale of Vodafone’s masts is going ahead.

Vodafone New Zealand’s investor owners recently communicated that a capital release through the sale of the telecoms tower assets could be on the cards and on Monday revealed that they have signed up advisors to get the job done. Or at least one of them did. The information comes from New Zealand-based investor Infratil, which holds 49.9% of Vodafone NZ, having teamed up with Canada’s Brookfield Asset Management to buy the telco in mid-2019.

Infratil said Vodafone – which retains its brand despite having severed ties with its erstwhile parent – has appointed Barrenjoey and UBS to advise it on the sale and engage with the market.

It did not provide further details, other than to note that there are 1,487 towers up for grabs and that Vodafone has pledged to add more, with a view to generating NZ$51 million in EBITDA in FY 2023; that’s the financial year starting in April. But Bloomberg has had eyes on a presentation given to prospective investors and shared a little more information late last week.

Vodafone will add another 290 sites to the portfolio by the year ending March 2027, the newswire noted, citing the presentation. It also shared that the average lease term of the sites is around 13 years.

But more interestingly, it quoted an unnamed source familiar with the matter as saying that the towers could be worth as much as NZ$1.5 billion.

A very rough calculation shows that figure is about 29x EBITDA – based on the business’s projected earnings above – which is certainly in the right ballpark based on other international towers deals in recent months.

For example, Telstra sold 49% of its towers business to a group of funds comprising the Future Fund, Commonwealth Superannuation Corporation and Sunsuper for A$2.8 billion (just over US$2 billion) last summer. That was 28x EBITDAaL multiple. A deal announced the same day many thousands of miles away saw Telia Company agree to sell a chunk of its Finnish and Norwegian towers business for a 27x earnings multiple, while back in Australia in October Singtel’s Optus agreed a 38x EBITDA deal for 70% of its Australia Tower Network (ATN) unit, but noted that the figure will fall to 28x following the completion of its build-to-suit programme.

There’s certainly a pattern developing here, and it probably doesn’t need a loose-lipped executive in the thick of the sale process to take a stab at a NZ$1.5 billion valuation.

Naturally, we’ll have to wait and see how this one plays out, but there’s no reason to believe that much has changed in the towers space of late. It’s safe to predict that Infratil and Brookfield will have little trouble attracting buyers for their towers, and will bring in a fair few dollars when a sale goes ahead.