Bidders line up for Optus' A$2 billion towers sale

Australia’s telcos have not moved as quickly as their European counterparts, but 2021 is shaping up to be the year of towers sales down under.

Optus has not divulged a lot about its planned towers transaction, but reports in the financial press this week suggest that things are shaping up nicely.

Parent company Singtel is offering 60%-70% of its Optus unit’s towers to would-be investors via an auction that is being run by Bank of America, the Australian Financial Review reported. According to its sources, the bank has sent a process letter to bidders asking for indicative bids by 17 June. Singtel aims to shortlist bidders based on the investors’ business plan, but has also made it clear that it wants to maximise the proceeds it could receive from the sale, they said.

Separately, Bloomberg cited unnamed sources of its own as saying that a deal for the towers stake could be worth around A$2 billion (US$1.5 billion).

The newswire listed Brookfield Asset Management, IFM Investors and American Tower as potential bidders, adding that Symphony Consortium, which comprises local player Stilmark Holdings, ATN International and Canadian pension fund OMERS Infrastructure Management revealed last year that it would take part in the sale. AFR’s bidder list also includes fund managers Morrison & Co, QIC Ltd, Macquarie’s Axicom, and Cellnex Telecom, as well other Australian investors, some of which it believes will bid jointly.

Up for grabs is a business with 2,312 mobile towers and rooftop sites across Australia – around two third are towers – with a 1.6x tenancy ratio. Naturally Optus is the unit’s biggest customer, accounting for 81% of revenue, but it also counts Telstra, TPG and NBN Co amongst its clients. The business generates around A$100 million per year in EBITDA and a margin of 60%. The above information comes from a pitch to investors by Bank of America last month and seen by AFR.

The paper says shortlisted parties will be asked to submit binding bids in the third quarter, which suggests we could have an outcome before the end of the year.

Similarly, Optus’ biggest rival Telstra is selling towers against a similar timeframe. Chief executive Andy Penn recently said the incumbent is on track to bring external investment into the business it dubs InfraCo Towers in the second half of this year. Telstra expects to receive binding offers from would-be investors by year-end, he said.

Like Optus, Telstra is playing its cards close to its chest on the towers sale; we’re not yet sure whether it will sell all or only part of the business.

One thing is certain though: there will be no shortage of interest from investors when Australia’s big two telcos finalise their asset sales over the next six months or so.