Vodafone Group will create a separate business to house its tower infrastructure in Europe with plans to cash-in on the assets within the next two years, including through a possible IPO of the new company.
In an announcement made alongside its fiscal Q1 results, Vodafone said the entity would be the largest tower company in Europe. Its assets include 61,700 towers across ten markets with potential EBITDA of around €900 million.
Named TowerCo, the business is expected to be operational by May 2020 with Vodafone pursuing the “potential of monetisation opportunities” for it over the next 18 months. Proceeds will be used to cut the operator group’s debt.
Vodafone said it also plans to sign further network sharing agreements in Europe having already struck similar deals in Italy, Spain and the UK.
The decision to spin-off its tower business follows a review of the business segment announced last year alongside a series of measures to slash operating expenses.
Discussing the deal on the company’s media conference call, CEO Nick Read (pictured) said there was: “A substantial opportunity to unlock the embedded value of our towers,” adding the move was a “really important step on our journey to transform Vodafone.”
During Vodafone’s Q1 – comprising the three months to the end of June – revenue fell €0.2 billion to €10.7 billion, a decline attributed to negative foreign exchange movements. Profit figures are not reported on a quarterly basis.
Despite the drop in earnings the company pointed to retail growth in Germany and improving market conditions in Italy, a unit previously highlighted by the operator as suffering from tough price pressure. Competitor promotions continued to have a negative impact in Spain, it added.
Moves to change the make-up of its tariffs and measures to cut €400 million off annual operating expenses in Europe were on track, the operator said, noting it also expects to achieve significant benefits from the acquisition of Liberty Global’s assets in central and Eastern Europe after the completion of the deal at the end of July.
“Following a significant quarter of commercial activity, we expect the gradual recovery in our service revenues to continue, underpinning our financial outlook for the year,” Read said.
“With the completion of the Liberty Global acquisitions, Vodafone will become Europe’s leading converged operator, with growing fixed and converged services contributing around half of our European service revenues. We have developed a detailed plan to deliver the customer benefits and capture the substantial synergies from the deal, which we will start to execute immediately.”