Deutsche Telekom could fetch $22B for its tower portfolio

Deutsche Telekom is planning to sell its 40,600-tower portfolio across Germany and Austria. Potential suitors include American Tower, Spain’s Cellnex, Vodafone Group’s Vantage Towers and Orange’s Totem, as well as private equity investors.

DT is working with Goldman Sachs as its advisor, according to Reuters. The German telecom is expected to want in the range of $19-$22 billion for its towers. It will use the money to cut its huge debt of more than $143 billion and to buy more control of its lucrative U.S. T-Mobile business.

The analysts at Wells Fargo, led by Eric Luebchow, wrote that DT's tower subsidiary, which includes 33,000 tower sites in Germany and 7,000 in Austria, “is quite possibly the most strategic scaled tower portfolio for sale across the globe,” and the exposure to the German market “is the crown jewel, which is, in our view, the most attractive major European tower market for near-term 5G deployments.”

Of the German tower sites, 70% are rooftop-based, making up about 45% of the entire German tower market, wrote the Wells Fargo analysts. DT’s towers generated about $1.2 billion in revenue in 2021.

American Tower

American Tower has more than 220,000 cell tower sites around the world, with about one quarter of those in Europe.

The company has been on a buying spree lately. In early 2021 it announced it was buying Telefónica’s tower business, Telxius Towers, for about $9.4 billion. Telxius has towers in Spain and Germany. Then in late 2021, AMT announced it was buying the data center business of CoreSite for another $10.1 billion.

The Wells Fargo analysts said if American Tower bought DT’s towers the downside would be that the additional equity funding required “could create a near-term overhang on AMT shares.”

Last week, American Tower’s CFO Rodney Smith spoke at a Deutsche Bank Media, Internet and Telco conference where he acknowledge that AMT has been busy with acquisitions. But he said the company is still focused on collecting assets around the globe to drive growth through the increased consumption of mobile data.

“Europe is really strong for us. We couldn't be more happy with the acquisition we had done and the way that it's performing,” said Smith, according to a Seeking Alpha transcript.

He said in 2021, AMT saw organic tenant billings growth of about 5% in Europe. Since its purchase of Telxius it is now forecasting 9% organic tenant growth in its European business this year.

“We think Europe is really well positioned for many years of solid demand,” said Smith.

Cellnex, Vantage, Totem

Spain-based Cellnex has bought over 40 tower portfolios since 2015 across Europe, with Germany the largest "hole" in its portfolio, according to Wells Fargo. “Their strategy has largely been an inorganic one over the years, and Germany would seem to be a natural fit within its pan-European tower business,” they wrote. However, Cellnex is “highly-levered” at this time.

Orange’s Totem is another possible bidder. The company has more than 26,000 tower sites across France and Spain. “They have publicly announced a strategy based on both organic and inorganic growth to scale their passive towers business,” wrote Wells Fargo.

Finally, Vantage Towers has assets across eight European markets, including over 19,000 sites in Germany. Vantage Towers was spun out of Vodafone in 2021. Not only is Vantage Towers considered a prospect to buy DT’s tower portfolio, but Vantage, itself, is reportedly being looked at by private equity investors, according to Reuters.