Vodafone’s cell tower sale expected to net $1b-plus

A market engagement process has now commenced, with Barrenjoey and UBS engaged to advise Vodafone NZ.

Richard Llewellyn, Vodafone

The first bidders have emerged for Vodafone NZ’s cell tower network, which analysts expect to fetch more than $1 billion, based on similar deals across the Tasman.

The NZ Super Fund has teamed up with the Ontario Teachers’ Pension Plan — which once bought Yellow Pages from Telecom — and are weighing a joint bid, according to an Australian Financial Review report.

The paper says “there is no shortage of tyre-kickers”.

Vodafone NZ and the Super Fund have been approached for comment, but both are likely to play their cards close to their chest at this point.

But on March 7, Vodafone external affairs head Richard Llewellyn told the Weekend Herald, “A market engagement process has now commenced, with Barrenjoey and

UBS engaged to advise Vodafone NZ.”

Vodafone NZ is half-owned by NZX-listed Infratil, and half by Canada’s Brookfield Asset Management.

According to an investor briefing — confirmed by Llewellyn — a buyer of “TowerCo” (the placeholder name for a firm running the network of about

1500 cell sites) was projected to make operating earnings of $51 million for the 2023 financial year.

“Vodafone NZ has the largest tower portfolio in New Zealand, covering 98 per cent of NZ’s population, with strong co-tenancy potential, currently comprising around

1487 wholly owned mobile towers spread across New Zealand,” Llewellyn said.

The buyer would lease the sites back to Vodafone for 40 years. There would be 290 new builds under a contracted build-to-sell programme.

Llewellyn said only the “passive” tower assets were up for grabs. “Typically the physical tower, masts and poles, foundations, fencing and access facilities, and any associated contractual rights to occupy the site area.”

The deal does not include electronics, spectrum or backhaul (wireless or fibre links from the tower to Vodafone’s network).

The possible sale follows two deals across the Tasman that have made cell site networks hot property.

In October 2021, Optus said it had sold a 70 per cent stake in its cell tower subsidiary to AustralianSuper (the new co-owner of Vocus) in a A$1.9b ($1.92b) deal that valued the

2312-site network at A$2.3b.

And in June last year, Telstra sold

49 per cent of its telecommunications towers business, InfraCo Towers — which has around 5570 sites — to a consortium for A$2.8b. The consortium was led by Morrison & Co, which manages Vodafone NZ half-owner Infratil. But for the Telstra tower deal, Morrison was representing a group of Australian super funds.

Based on those deals, pundits across the ditch see Vodafone NZ’s tower network fetching between $1b and $2b.

Infratil has not commented on how proceeds from any TowerCo sale could be spent. One option could simply be paying down debt (Infratil and Brookfield each made a $1b contribution to their $3.4b deal to buy Vodafone NZ in 2019, with the balance coming from debt).

Spark and 2degrees’ plans

At its half-year result last month, Spark NZ confirmed it was also considering a spin-off of its passive cell tower assets. The telco also has close to 1500 cell sites.

Yesterday morning, the company confirmed Forsyth Barr and Jarden had been engaged to advise on the possible deal.

On the telco’s interim results conference call, chief financial officer Stefan Knight said Spark would be looking to retain a stake in “TowerCo” in an anticipated $100m deal that would bring in a third-party investor, should it go ahead.

Last week, 2degrees chief technology officer Martin Sharrock told the Herald his company — which has a merger on the table with Orcon Group — has no immediate TowerCo plans.

“Right now, our focus is on our network and the experience we offer for customers, but we are watching this space with interest,” Sharrock said.

Shared rural towers excluded

Beyond their own networks, Spark, Vodafone and 2degrees are partners in the Rural Connectivity Group, a joint venture that is constructing several hundred cell towers in remote areas as part of the wider, publicprivate Rural Broadband Initiative.

Rural Connectivity Group towers would not be part of any TowerCo sale, Llewellyn said.

The Super Fund has been approached for comment.