Vodafone approached infra funds for $16B Vantage Towers deal

Vodafone has approached global infrastructure funds to invest in its $16 billion mast company Vantage Towers, but the telecoms business’s preference is for an industry merger, according to sources familiar with the matter.

According to reports, the bidders, including Brookfield and Global Infrastructure Partners (GIP), have submitted unanswered proposals valuing Vantage Towers at a discounted price to $15 billion ($16.57 billion), according to sources.

According to a source, the offers are for a majority share in Vantage Towers, adding that Vodafone was looking at the proposals and had not taken any action.

Vodafone’s stock was up 1.4 percent, outperforming their peers in the telecoms industry, which was broadly flat.

Vodafone, which bought Vantage Towers in Frankfurt in March 2021 and now owns 81 percent of its business, has been reluctant to talk with financial investors as it seeks to pursue a merger with either Deutsche Telekom’s towers subsidiary DFMG or Orange’s Totem, according to two distinct sources, and stating that no transaction is imminent.

Un spokesperson for Deutsche Telekom said the company is reviewing key considerations for its infrastructure business without going further.

Cevian Capital, Europe’s largest activist fund, is under pressure to simplify its portfolio, strengthen its strategy in key markets, and increase profits.

If Vodafone goes ahead, a contract for its towers business would align Vodafone’s strategy with Cevian’s desire to look into strategic opportunities for its tower assets.

A similar move would come after the London-listed business rejected an 11 billion euro incentive for its Italian operations in February, while its ambitions to consolidate the Spanish market hit a block in early March after Orange and MasMovil announced exclusive discussions to combine their respective companies in Spain.

CEOs of telecoms have called for market consolidation to reduce competition and increase operators’ profitability in a time when they need cash to invest in the 5G mobile telecom infrastructure.

Like-Minded player
Vodafone is now focusing on acquiring value from its controlling stake in Vantage Towers, with boss Nick Read repeatedly mentioning Orange’s Totem or Deutsche Telekom’s tower assets as potential candidates.

“For Vantage, the next stage (for) should be a industrial merger, bringing our towers together with another large player, a similar-minded player, and a similar-minded operator,” Read told reporters last month, expressing his desire to investigate a combination with the infrastructure assets of either Orange or Deutsche Telekom.

While Vodafone was open to cutting its stake in Vantage, he added, “we’ve got to keep the money under control while still keeping afloat with that same person.”

Deutsche Telekom had begun an auction for its towers business earlier this month, with indicative bids planned for the month in March.

While Vodafone is being closely monitored by Deutsche Telekom’s towers sale, one source said it is more likely to pursue a contract with Orange’s Totem owing to antitrust concerns in Germany.

This source had ruled out a transaction with financial investors, declaring that at this stage only a group of companies was on the cards.

Overburdened by extensive debt and rising costs, telecom towers have been the target of several major mergers in the past few years.

Independent tower operators like Cellnex and American Tower Corp, both from the United States, are on the lookout for infrastructure agreements as they seek to expand in Europe for the roll-out of next-generation 5G technology. List23