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Telstra’s InfraCo Fixed the next big super battleground

The sale of Telstra’s InfraCo Fixed business shapes as the biggest upcoming battleground for superannuation giants keen to get their hands on the next generation of telecoms infrastructure.

As the well of old-world transport and energy infrastructure opportunities shrinks further with the $23.6 billion takeover play for Sydney Airport and $9.6 billion bid for AusNet Services, superannuation executives told The Australian Financial Review Infrastructure Summit this week their sights were now on telco assets.

The trend has already started. A Morrison & Co-managed consortium of big super investors and the Future Fund snapped up a 49 per cent holding in Telstra’s InfraCo Towers business for $2.8 billion on June 30, and AustralianSuper took a majority stake in Optus’ tower network for $1.9 billion just shortly thereafter.

But a source close to the InfraCo Towers deal, speaking on condition of anonymity, said Telstra’s prospective monetisation of its fixed-line segment was the big-ticket telecommunications item in 2022.

“InfraCo Fixed will be the big monster,” they said.

The exact timeline for a sale is murky. Telstra is working hard to simplify the structure of InfraCo Fixed – which is up to five times larger than InfraCo Towers – to a point it is “due diligencable”, as chief Andy Penn said recently.

“A structure similar to the towers deal is definitely one scenario which is feasible but as I said, there are others as well we could consider: subsets of assets or the whole of InfraCo Fixed,” Mr Penn said in September.

Whatever form and timeline it takes, market anticipation is high.

Morgan Stanley analyst Andrew McLeod wrote in late June that he expected Telstra’s fixed assets to fetch a higher price tag than the tower sale, given the tower assets represented about 3 per cent of his forward earnings forecasts.

“It is relatively small in the scheme of things,” Mr McLeod said.

In comparison, he reckoned the fixed assets would contribute $2.5 billion, or about a third of Telstra’s estimated earnings in the 2022 financial year.

As for who would show interest in InfraCo Fixed, sources believed large super funds, private equity players such as Kohlberg Kravis Roberts (KKR) and infrastructure-focused investors such as Brookfield were likely to get involved.

Axicom up for grabs, TPG mulls tower sale

Other anticipated telco infrastructure deals include the Macquarie Capital-run sale of Macquarie Infrastructure and Real Assets Management’s (MIRA) Axicom – first revealed by Street Talk – and a possible spin-off of TPG Telecom’s mobile tower assets sometime in 2022.

The former will run as a two part auction over the next six or so months, while, on the latter, TPG says a review of its tower network is continuing with no decision made on opening the assets up to outside investment.

There is also speculation that MIRA will soon look to offload the retail side of Vocus – acquired earlier this year for $3.5 billion – to focus the company almost entirely on its core telecoms infrastructure business.

ASX-listed Uniti Group is seen as a potential takeover target by some in investment banking circles, even though its share price of $3.84 is more than double the point at which it started the year.

It is understood Morrison & Co ran the ruler over Uniti only to back off because of the inflated price, but one investment banker would not reject the prospect of a takeover offer in the near term due to a keen global interest in telecoms assets and cheap access to capital with record low interest rates.

“It’s a mistake in this market that anything is inactionable,” they said. Financial Review

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