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Access Evolution

Access Evolution

TPG Telecom mulls joining Australian tower sell-off party

Anne Morris
By Anne Morris

Aug 20, 2021

via Flickr © Pug50 (CC BY 2.0)

via Flickr © Pug50 (CC BY 2.0)

  • TPG announces strategic review of its tower assets
  • Telstra and Optus have already formed separate towercos
  • TPG on track to achieve merger cost reduction target in 2021

Australia’s TPG Telecom, more than a year on from a somewhat bruising and long-winded merger process between the ‘old’ TPG and Vodafone Hutchison Australia (VHA), indicated that a sale of its tower assets could be on the cards in order to raise a bit of extra cash.

Somewhat buried in its half-year earnings report for 2021 (HY21), TPG announced it is undertaking a strategic review of its assets, but has not made any commitments thus far. TPG operates infrastructure on 5,800 rooftops and towers, and said it owns the passive infrastructure on around 1,200 of those sites.

If TPG does decide to go down this route, it will be following in the footsteps of multiple carriers around the world that have either completed or are considering ways of monetising valuable infrastructure assets such as cell towers.

TPG’s rivals in Australia, Telstra and Singtel-owned Optus, are among them. Telstra created Telstra InfraCo in 2018 and shifted all mobile towers, fibre, and network-supporting infrastructure into the standalone infrastructure business in 2019. InfraCo holds 250,000 kilometres of fibre optic cable, 370,000 kilometres of ducts, about 8,200 mobile towers, masts and poles, 10,000 exchanges, two data centres, and access to 400,000 kilometres of subsea cables.

Telstra then split the unit further into InfraCo Towers; InfraCo Fixed, which will own and operate Telstra’s passive or physical infrastructure assets; and ServeCo. In June this year, the carrier agreed to sell a 49% stake in Telstra InfraCo Towers for A$2.8 billion (US$1.99 billion) to a consortium comprising the Future Fund, Commonwealth Superannuation Corporation and Sunsuper. According to specialist research firm TowerXchange, the current portfolio of 8,200 towers includes 5,570 mobile and 2,630 non-mobile sites, making the InfraCo Towers business the largest mobile tower infrastructure provider in Australia.

Optus is also getting in on the act. Singtel established the Australia Tower Network (ATN) in August 2020 and is now said to be seeking investors for the unit, which apparently has 2,132 towers. Current estimates suggest that Optus should be able to find a buyer for between A$1.5 billion and A$2 billion for a stake of between 60% and 70%.

In May, Singtel and its bankers reportedly drew up a shortlist of preferred bidders, including Macquarie Infrastructure and Real Assets (MIRA) and its local towers investment company Axicom; Canada’s Brookfield Infrastructure Partners; QIC and its bid partner KKR & Co.; AustralianSuper; and the Symphony Consortium, which includes Canada’s OMERS Infrastructure, domestic firm Stilmark and US-based ATN International (ATNI).

According to reports from early August, KKR has already abandoned its pursuit of the portfolio, and instead is focusing on Spark Infrastructure, the Australian electricity infrastructure investor. 

Whatever the outcome is for Optus or TPG tower assets, this year is certainly shaping up to be an interesting one in terms of infrastructure M&A, with investor interest from home and abroad. 

As for TPG, it is still in the throes of completing the integration with VHA. The carrier said it is on track to achieving a targeted $70 million reduction in costs through the merger in 2021, after reporting $38 million in ‘cost synergies’ during H121. 

The group’s reported revenue increased 71% year-on-year to A$2.63 billion and reported EBITDA increased by 67% to A$886 million, as the HY20 results only had four days’ contribution from TPG Corporation. 

On a pro forma basis, which calculates figures to simulate what the group’s results would have been if the merger had been effective throughout HY20, revenue fell 3% from A$2.71 billion and EBITDA also dropped 3% from A$918 million.

Related Topics
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  • Telstra

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