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According to Spanish media, American Tower and Brookfield Asset Management are reportedly considering acquiring Cellnex, Europe’s largest mobile tower operator
Mobile towers have always been an attractive prospect for investors, with their low operational costs and steady long-term returns denoting them as relatively low risk. In recent years, however, investor appetite for infrastructure has reached unprecedented heights, prompting enormous consolidation worldwide, particularly in Europe and Africa.
In many ways, this activity has been driven by the broader state of the telecoms industry as a whole. Network operators are currently in the process of rolling out expensive 5G and fibre networks, while at the same time seeing . As a result, offloading their passive infrastructure becomes an appealing proposition, with major telecoms groups like Orange and Vodafone spinning off their tower units into independent companies.
Throughout this global consolidation, Spanish infrastructure giant Cellnex has emerged as one of the voracious of all towercos, buying up a huge amount of European assets, including a €10 billion deal to purchase all the European towers belonging to CK Hutchison. It is currently the largest independent tower company in Europe, with over 130,000 thousand sites in 12 markets.
In the last year, however, the global economy has taken a turn for the worse. With interest rates on soaring, the debt used to finance Cellnex’s enormous acquisitions will need to be refinanced at a higher rate, cutting painfully into the company’s bottom line.
In November last year, Cellnex announced that its insatiable M&A spree was officially over, with CEO Tobias Martínez saying that the company now needed to “face and beat inflation”.
The company has net debt of €17.1 billion and is seeking to reduce its leverage from roughly eight-times its earnings before interest, tax, depreciation and amortisation (EBITDA) to below seven-times.
The company’s share price has fallen almost 40% over the last year, presumably a major factor in the resignation of Martínez as CEO two weeks ago.
Now, rumours suggest that this lowered share price is attracting attention from potential rivals, with Spanish media suggesting that American Tower and Brookfield Asset Management are considering a joint takeover bid.
While no financial details were mentioned, analysts suggest that such a deal would be worth around €50 billion.
Cellnex, American Tower, and Brookfield have all refused to comment, while other media sources have cited other unnamed sources refuting the rumour.
It should go without saying that if such a takeover were to materialise, it would have enormous implications for the European mobile market, making the combined entity a dominant force in markets like the UK, France, and Spain.
As a result, various regulatory bodies would closely investigate such a tie up, with American Tower surely forced to offload a significant amount of its own towers that overlap with Cellnex’s portfolio, at the very least.
This would be nothing overly surprising – Cellnex itself has already shown a willingness to pursue this sort of compromise, offloading some of its overlapping towers in the UK in order to gain clearance for its acquisition of CK Hutchison’s towers in the market.
But perhaps the largest obstacle to such an acquisition is not some regulatory complexity, but simply cash. While American Tower and Brookfield could, at a stretch, likely afford such a giant investment, they would surely need a hugely favourable valuation of Cellnex to truly consider such a purchase.
With Cellnex already taking steps to consolidate their position, reduce debt, and encourage organic growth, the company will surely argue that the company is undervalued, making reaching an amiable takeover agreement unlikely.
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