Vantage Towers AG (Frankfort: VTWR.F) is now a standalone public tower company following a successful initial public offering after Vodafone Group (NASDAQ: VOD) spun off its tower operations in eight European countries. In the process, VTWR becomes one of the largest tower companies in Europe, competing with other big towercos such as Cellnex and American Tower/Telxius.
VTWR owns 45,700 macro sites, including ground-based towers and rooftops, across its eight markets. In addition, the company has full access to another 36,500 sites through co-controlling agreements with two major towercos – Infrastrutture Wireless Italiane (INWIT) in Italy with 22,200 sites, and Cornerstone Telecommunication Infrastructure (Cornerstone) that operates 14,300 macro sites in the U.K.
Germany is VTWR’s largest market with 19,400 towers accounting for 42 percent of the company’s total owned macro sites. Along with Spain and Greece, these three markets account for 32,900 or 72 percent of the portfolio with macro sites in the Czech Republic, Portugal, Romania, Hungary, and Ireland accounting for the 12,800-tower balance.
VTWR reported its first financial results for fiscal year 2021 ending March 31, even though the IPO was completed in March 2021.
To demonstrate comparative performance, VTWR presented results on a pro forma basis for FY20PF and FY21PF as though the company was operating on its own from April 1, 2019.
For FY21PF, the company reported revenues of $1.18 billion, up 2.2 percent on a year-over-year basis while Adjusted EBITDA increased 2.1 percent to $1 billion and recurring free cash flow grew 2.4 percent to $469 million.
For FY21, VTWR added 600 new macro sites, 440 in Germany alone, while decommissioning 300 redundant sites in Spain and other European markets. Net increase was nearly 1 percent to reach the 45,700 count.
At the same time, the company added around 1,800 new tenants, extending the total to 64,000 at the end of FY21. Of the new additions, roughly 1,100 are committed leases and nearly 700 are non-committed or pending agreements.
New adds included about 1,300 non-Vodafone accounts. This is important if VTWR is to be successful as a standalone tower company. It cannot be reliant solely on VOD to grow the business even though VOD remains its prime tenant in all eight markets.
With the tenant additions in FY21, VTWR achieved a consolidated tenancy ratio across its eight markets of 1.4, up 2.1 percent YoY. This ratio represents the total number of tenants divided by the total number of macro sites.
The company has set growth goals for FY22, its first full year operating as a standalone company. It expects to grow site leasing revenues to $1.2 billion, while achieving a mid-single digit CAGR over a medium term, about 3-5 years. VTWR projects Adjusted EBITDA in the high 50 percentage of revenues, and recurring FCF growing at a mid- to high-single digit CAGR over the same period.
The company sees 5G and IoT network deployments across Europe as its biggest growth drivers over that medium term.
Vivek Badrinath, Vantage Towers AG CEO, comments: “Europe’s digital transformation is accelerating, and we are central to its growth. As a 5G super host, we are a key enabler for the 5G roll-out. Mobile operators are expanding their networks …, and they value the quality of our grid.”
The company has a five-point strategy for achieving its growth.
First, it is relying on its grid quality to attract tenants. VTWR points out that it holds the first or second macro site market share position compared to other market participants in nine out of 10 countries with a highly rated client base and active sharing agreements.
Second, it has secured numerous growth prospects and expects to ramp up its build-to-suit program. It already has a high volume of established master service agreements with annual price escalators tied to local inflation rates. To gain economies of scale, VTWR has adopted a standardized BTS approach across all its markets using an efficient design-to-cost approach and a network of established contractors for the site work.
Third, the company believes its MSAs are competitive, reflecting recent market trends and creating an attractive leasing framework for major MNOs going forward.
Fourth, VTWR is leveraging its strong commercial organization to drive lease ups within the portfolio and maximize the non-Vodafone business while raising the tenancy ratio.
Finally, the company has access to capital needed to invest in its network.
Part of that investment includes an active ground lease buyout program. The company launched the GLBO program in FY21 and has already garnered around 200 agreements in Spain and is ramping up in Germany with the first contracts already signed. Moreover, It is getting a lot of interest since launching the program in all of its markets.
By John Celentano, Inside Towers Business Editor
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