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Telxius acquires Telefónica Deutschland tower sites

June 9, 2020

By Colin Mann

Telxius, the infrastructure unit of the Telefónica Group, has reached an agreement with German mobile operator Telefónica Deutschland for the acquisition of nearly 10,100 sites, which it says consolidates its position as one of the main global neutral infrastructure operators. The agreement includes a commitment to build 2,400 new Base Transceiver Station (BTS) sites, ensuring exceptional future growth in Europe’s largest market.

Once the acquisition and the BTS programme are completed, Telxius’s tower portfolio will exceed 32,800 sites in the six countries where it operates, doubling its size since Telxius was created in 2016. Of these sites, approximately 80 per cent are located in Europe (Spain and Germany), while the remaining portfolio is in Latin America (Brazil, Peru, Chile and Argentina).

The agreement, which is subject to regulatory approvals, amounts to a total of €1.5 billion. Telxius will finance 90 per cent of the value of the acquisition via a capital increase (to be subscribed by its current shareholders in proportion to their participation in the company) and by internally-generated resources. The remaining 10 per cent will be financed through incremental debt. The transaction is structured in two phases: Telxius will acquire approximately 60 per cent of the portfolio first and the remaining 40 per cent by August 2021.

“This agreement marks an important transformation of Telxius’s profile,” stated Mario Martín, CEO of Telxius. “It consolidates us as a leading infrastructure company and we significantly increase our exposure to both the tower business and the largest European market. In addition, we ensure an extraordinary growth profile.”

The acquired portfolio is mainly made up of rooftops and has growth potential, with a current tenancy ratio of 1.04x and a wide presence in the main regions of the country, North Rhine-Westphalia, Baden-Wurtemberg and Bavaria, where 52 per cent of the acquired sites are located. Additionally, the portfolio is distributed in a balanced way between urban areas (45 per cent) and semi-urban and rural areas (55 per cent), effectively complementing the Telxius footprint in Germany, until now mostly rural (84 per cent).

This acquisition will allow Telxius to significantly strengthen its presence in Germany, the largest telecommunications market in Europe where a strong deployment by operators is expected to improve mobile broadband coverage and the future deployment of 5G, which will start mainly in urban areas and rooftops. Additionally, the commitments and obligations defined by the German government, the low levels of fibre penetration and the potential entry of a fourth operator will accelerate network deployments in the country.

With this acquisition and the BTS commitment, Telxius Towers Germany multiplies its portfolio by more than six, reaching nearly 15,000 owned sites. This consolidates the company as one of the main neutral infrastructure operators in the country. Since its creation in 2016, Telxius Towers Germany has experienced a strong growth thanks to its excellent business relationship with the main telecommunications operators and its operational capabilities in the country. Since 2016, it has increased third-party colocations in its current portfolio by 85 per cent, reaching a tenancy ratio of 1.68x.

Globally, once the transfer of the nearly 10,100 sites acquired in Germany becomes effective, Telxius will increase its current size by 50 per cent and exceed 30,400 sites, reaching 32,800 sites once the BTS deployment is complete.

The growth in Telxius portfolio is complemented by the strong increase in the number of colocations in 1Q20 (+ 18.6 per cent year-on-year as of March 31st, 2020), which has led to a revenue increase in the tower business by + 11.5 per cent in organic terms in the first quarter of 2020 compared to the same period of the previous year.

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