Vodafone TowerCo Spin-Off IPO Gets Thumbs Up From Analysts

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Analysts and industry experts are optimistic about the announcement that Vodafone Group PLC intends to spin off its European mobile towers with plans for a stock market flotation, reported S&P Global Market Intelligence. Despite some failed IPO plans by other tower companies (Arqiva Group Ltd. and Africa’s Helios Towers Africa Ltd.), Vodaphone’s IPO has more hope due to 5G. According to Juri Zanieri, an infrastructure research analyst at Kempen & Co., the tower sector is “hot property” right now due to 5G, and it’s expected that tower owners will raise rents for telcos leasing space on infrastructure.

Vodafone said its TowerCo, expected to be created by May 2020, would generate a proportionate annual revenue of over $1.88 billion and over $999 million EBITDA. The company will either float the firm or dispose of “minority or majority stakes at an individual country level” within 18 months. Analysts expect the company to be valued at between $16 billion and $23 billion, per S&P. Vodafone’s CEO Nick Read said during a July 26 earnings call that the telco has already received offers “north of 20 times EV to EBITDA.”   

After purchasing 5G spectrum in Italy and Germany, the telco plans to use the IPO proceeds to reduce its nearly $30 billion debt. This number is slated to grow as Vodafone completed a $20.4 billion purchase of Liberty Global PLC’s German and Eastern European assets.

 Vodafone’s shares saw their biggest single-day gain in over a decade following its TowerCo announcement, which could inspire other telcos to sell their tower assets, analysts said. “Some operators have sold or are already selling their towers,” Robert Grindle, head of European TMT research at Deutsche Bank, said. “So, you have to look at the ones who still have towers left.”

Regarding potential buyers, Kieron Osmotherly, CEO of TowerXchange, predicts Vodafone could attract investors like Cellnex Telecom SA, which has invested nearly $3 billion in tower purchases in Europe since 2016, or American Tower Corp. Osmotherly added that Global players lacking a U.K. footprint might also seize the opportunity that TowerCo offers to enter the region, such as U.S.-based SBA Communications Corp. and Nigeria’s IHS Towers NG Ltd.

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