- Daily Zen
Vodafone Group Plc plans an initial public offering of 2 billion euros or $2.4 billion of its European mobile-phone tower unit in Frankfurt. Vantage would be the biggest European IPO since InPost, the parcel locker company, in January.
According to a statement from the company in its listing documents, the U.K. telecommunications giant plans to sell shares in its German Vantage Towers AG at 22.50 euros to 29 euros apiece. The market value of Vantage has been determined at 14.7 billion euros. Vodafone intends to use the proceeds to pay some of its accumulated debt, the company said.
Two investment funds, Digital Colony and RRJ, have agreed to buy 500 million euros and 450 million euros of stock, respectively. The stock will be listed from March 18. The pre interest in the shares from investors is bound to push pricing for Vantage’s IPO, New Street Research analyst James Ratzer said, adding that they also pose a risk to the company’s liquidity for other shareholders.
Vodafone will receive all of the net proceeds from the potential sale of shares under the base offer, upsize option and any over-allotment shares acquired pursuant to the ‘greenshoe option’, said a statement today.
Vantage Towers will not receive any of the proceeds from, nor incur any costs in connection with, the IPO, the statement added.
Telecom carriers in Europe are facing some tough times due to the Covid-19 related woes, increasing competition, falling prices, and the effort to get maximum value from squeezed margins of the assets such as fiber and mast connections. The fifth-generation network transition is also driving demand for more tower capacity, fueling a wave of consolidation and restructuring. Tower companies are trying to get maximum benefits by leasing out space to mobile operators.
Vantage plans to pay out 60% of recurring free cash flow annually in dividends and will distribute 280 million euros in July for this financial year, the company said last month.
Vantage’s problem is that it is renting out space to the direct competitor of its majority shareholder—Vodafone. Independent European mast operators like Cellnex Telecom SA don’t have this drawback.
Deutsche Telekom and Orange, other big operators, are yet to get into the mast renting fray. Captive tower companies, which are controlled by the telecoms company that built them, generate lower growth rates than independent players such as Cellnex, but still have to bring a respectable return. Vantage will now have to grow organically. It will invest in building new towers, hire out its estate to other telecom operators to use its masts for their equipment and consolidate force in the market.
It is believed that it will use about a €1bn and its shares to take over rivals for consolidation. Cellnex has consolidated the European towers market in the past five years, while American Tower, the world’s largest tower company, has emerged as another significant player after paying €7.7 billion for Spain’s Telxius this year.
“The Vantage Towers IPO is moving ahead at pace,” said Vivek Badrinath, chief executive of Vantage. Last year, analysts pegged Vantage’s enterprise value at €20 billion based on its competitors’ valuations, such as Spain’s Cellnex and Italy’s Inwit. But these companies have since seen their share values come down by a fifth.
After Vantage, Germany is looking to a few other blockbuster IPOs such as Volkswagen, Daimler and some other newer companies, including Babbel, ProSiebenSat, and dating platform ParshipMeet.