Cellnex cedes to shareholders, backs away from €20bn DT towers deal

Looks like a consortium of private equity firms led by KRR will be the victors

Cellnex, the infrastructure operator has backed away from trying to acquire Deutsche Telekom’s towers, according to the German newspaper Handelsblatt. The towerco, Deutsche Funkturm, is estimated to be worth €20 billion. Bloomberg reported private equity companies KRR, Global Infrastructure Partners and Stonepeak Partners made a better offer.
 
An announcement is expected later this week.
 
Cellnex’s share rose by 5.7% on the news that it had given up on the deal, as it had been so keen to establish a footprint in Germany that according to Reuters, it even offered Deutsche Telekom a small stake in the towerco.
 
It seems that Cellnex’s shareholders were less enthusiastic and concerned about the firm paying too high a price, even though Germany is the only major market in which Cellnex does not have a presence.
 
Last November, Deutsche Telekom announced it was seeking investment in or a buyer for its tower unit last year, although CEO Timotheus Hoettges said he was open to the possibility of a merger with a peer.
 
In the same month, Vodafone Group’s CEO, Nick Read, also said his company’s towerco, Vantage Towers, could end up in a “co-control” scenario, that was widely interpreted as merging with another European group’s tower unit, such as those of Deutsche Telekom or Orange to “shape the landscape across Europe” by both parties gaining economies of scale and an extended footprint.
 
Orange has stated it will not relinquish control of its towerco, TOTEM, although it is now under new management after the departure of long-term CEO Stéphane Richard earlier this year.
 
Somewhat under fire for a lack of progress with M&As, at the end-of-year earnings call with journalists and analysts in May, Read said that there had been discussions about Vantage Towers with both industrial (other operators) and “financial players” which, according to Reuters include investment funds Brookfield and Global Infrastructure Partners.

As Vantage Towers was seen as the most obvious M&A target, with Vodafone keen to get the towerco of its books to allow it more leeway, no doubt certain activist investors will be watching developments closely.