Deutsche Telekom announces the sale of 51 percent of GD Towers comprising its tower assets in Germany and Austria, to Digital Bridge and Brookfield at 17.5 billion euros enterprise value on a cash and debt free basis. The valuation represents an attractive EV/ pro forma adjusted EBITDA AL 2021A multiple of around 27. The transaction marks the successful conclusion of Deutsche Telekom’s strategic review of its towers business announced at the May 2021 Capital Markets Day.
“Deutsche Telekom once again delivers on its strategic agenda. We crystalize the value of our tower assets, thereby creating value for our shareholders,” said Tim Höttges, CEO of Deutsche Telekom. “At the same time the deal allows us to continue improving Deutsche Telekom’s undisputed network leadership in Germany and benefit from further value upside of the towers business through our retained 49 percent stake.”
“The partnership being formed today is about building the next generation digital infrastructure champion of Europe,” said Marc Ganzi, CEO of DigitalBridge. “The combination of Deutsche Telekom’s leading mobile network and market position, alongside one of the largest real asset managers in the world in Brookfield, combined with the digital infrastructure domain expertise of DigitalBridge, creates a team of unmatched capabilities to support GD Towers as it grows to meet the evolving network demands of enterprises and consumers across Europe.”
“We’re delighted to be partnering with Deutsche Telekom and DigitalBridge to expand our presence in the European telecom infrastructure sector,” said Sam Pollock, Managing Partner at Brookfield and CEO Infrastructure. “This represents a great opportunity to invest in a highly attractive tower portfolio, with highly contracted cash flows and strong upside potential. Brookfield is already a leading global infrastructure investor, with approximately 200,000 telecom tower and rooftop sites under management globally. We hope to bring that experience and expertise to this new partnership, for the benefit of our customers in Germany, Austria and beyond.”
With around 800 employees, GD Towers operates more than 40,000 sites in Germany and Austria and has a successful track record in delivering new sites for its anchor tenant Telekom Deutschland and securing revenues with third party customers. The Company generated 1.1 billion euros of pro forma revenues in 2021. Pro forma adjusted EBITDA AL 2021 amounted to 640 million euros.
Both Digital Bridge and Brookfield have substantial exposure to the European towers sector. In joining forces with Deutsche Telekom, the partners will provide both expertise and long-dated capital to further refine and evolve the GD Towers strategic plans and ambitions for enhanced value creation in both the core towers business and in fast-growing adjacent segments as well as through M&A. The transaction structure enables GD Towers to pursue these value-accretive investments with a capital structure appropriate for an infrastructure business, which otherwise would be subject to the constraints of the Deutsche Telekom balance sheet.
The current GD Towers leadership team with Bruno Jacobfeuerborn (CEO) and Thomas Ried (CFO) will continue running the business after closing. Deutsche Telekom retains a 49 percent stake and significant minority protection rights including the right to appoint two out of five members of the Shareholder Committee, including the initial chairman. Furthermore, Deutsche Telekom also has the right to regain control and reconsolidate GD Towers in the future.
Telekom Deutschland and Magenta Austria will continue to enjoy unconstrained access to the passive mobile infrastructure of GD Towers via favorable long-term (around 30 years) lease agreements. Amongst other these agreements afford the network operators inflation protection with annual site lease increases indexed to the respective consumer price indices at a discount of 15 percent but capped at 3 percent, guaranteed access to strategically critical ”golden sites”, preferential access to free site capacity for future network upgrades, industry-leading operational service levels and buyback rights. Both Telekom Deutschland and Magenta Austria have secured reciprocal contractual commitments from GD Towers for around 5,400 new sites through 2026 and prioritized capacity for radio access network modernization through 2028.
The transaction will reduce Deutsche Telekom’s financial leverage by 10.7 billion euros (c. 0.2x EBITDA AL) and net debt including leases by 6.5 billion euros (c. 0.1x EBITDA). The incremental headroom will mainly be used for deleveraging at the Deutsche Telekom Group level and to accelerate the path towards its targeted 50.1 percent share capital interest in T-Mobile US.
The transaction is subject to usual regulatory approvals. Closing is expected towards end of 2022.