Vodafone is planning to spin off its mobile tower business, Vantage Towers (formerly TowerCo), in early 2021. Here, you’ll discover everything you need to know about the initial public offering (IPO) and how you can trade it with IG.
What is Vodafone and Vodafone Towers?
Vodafone Group plc is a British multinational telecommunications company. Its registered office is located in Newbury, Berkshire, England and its global headquarters is based in London, England. It predominantly operates services in the regions of Asia, Africa, Europe, and Oceania.
Vodafone, Europe’s leading provider of converged fixed, mobile and TV services, introduces today Vantage Towers, Europe’s leading tower infrastructure platform. Vantage Towers supports Europe’s digitalisation by establishing and maintaining extensive, high quality and resilient networks, which form the backbone of digital services and a sustainable digital society.
The Vantage Towers senior management team is fully in place, led by Vivek Badrinath (CEO), Thomas Reisten (CFO) and Sonia Hernandez (CCO). Vantage Towers has highly secure, predictable cash flows underpinned by long-term, inflation-linked contractual arrangements with highly rated tenants, including Vodafone as the anchor tenant.
The group benefits from a tenancy ratio of 1.5x across the portfolio, including INWIT. There are also compelling structural growth opportunities from mobile coverage obligations and increasing end-user demand for data, with potential to expand into adjacent services and from disciplined M&A.
When is the IPO?
There is no set date for the Vantage Towers IPO, but Vodafone has stated that it plans to list the company on the Frankfurt Stock Exchange in early 2021. It hopes this will position Vodafone to capitalise on increasing demand for 5G technology. The final date of the IPO will depend on market conditions.
Before the IPO, IG could offer a ‘grey market’, which would enable you to get exposure to Vantage Towers before the company lists.
If we do offer a grey market, its price will be based on our prediction of Vantage Towers’s market capitalisation at the end of the first trading day. You can go long or short on this prediction – long (buy) if you think the market cap will go up and sell (short) if you think it will go down.
Valuation of the European Towers unit
The group refused to give a ballpark figure for the IPO, but said it would be “lower” than €10bn.
Speaking to journalists this morning, Read said Brexit was not a factor in picking Frankfurt over London for the towers business’ IPO. Instead he said Germany has proved itself as a successful launch point for many businesses.
“Frankfurt has shown success in a number of more complex IPOs. And in the end its investor base itself is very international,” he said.
Asked if the pivot towards continental Europe would affect the group’s operations in the UK, Read said: “Don’t read anything into the fact that we put our towers business in Frankfurt. We’re very committed to the UK and the UK headquartered business — we’re listed in the UK but we have businesses throughout the world.”
Vivek Badrinath, Vantage Towers’ new chief executive, added: “We have a strong platform to capture growth opportunities in connectivity across Europe, leveraging our long-term arrangements with leading operators.”
The initial IPO news breakout and the firms involved
Vodafone Group Plc has invited advisers to pitch for a role on the planned initial public offering of its European towers unit, which could raise more than 2 billion euros ($2.2 billion), people with knowledge of the matter said.
The U.K. carrier asked potential underwriters to submit proposals next month, according to the people, who asked not to be identified because the information is private. It plans to list the business as soon as early 2021 and is considering seeking a valuation of 10 billion euros to 20 billion euros, the people said.
Rothschild is helping manage the IPO preparations as financial adviser to Vodafone, according to the people. The role typically involves overseeing the selection of deal arrangers as well as making recommendations on other aspects of the listing.
Telecom operators are increasingly seeking ways to extract value from their tower portfolios. Wireless infrastructure has been drawing interest from investors attracted to the steady, long-term nature of the assets. Vodafone’s listing could help revive the European IPO market, which is on track for the slowest first half since 2012, according to data compiled by Bloomberg.
Relation between Vodafone and Uk’s Huawei Ban
Vodafone’s chief executive said the company were looking at the “complexity involved in this issue and trying to minimise disruption to customers through providing an adequate timeline” for ripping out Huawei technology from its network.
Read added that Vodafone were “working with the government” to rectify the issue, but held back from giving a benchmark figure for how much the Huawei ban would cost Vodafone, adding: “We just got the new rules and therefore we have to work through the impact”.
Richard Hunter, head of markets at Interactive Investor, said: “Vodafone has suffered in the face of the pandemic along with many others, but positive underlying prospects remain in evidence.
“On the one hand, the spike in data traffic has been a boon for the company, while also underlining the efficiency and dependability of its services.
“Less positively, however, lower roaming revenues as a result of decreasing international travel along with corporate project delays in the period, have a punched a hole in income… There is still a considerable way to go for Vodafone to regain its former glories, with a 43 per cent decline in the price over the last three years a sign of the challenge ahead.”
Vodafone reiterated TowerCo, to be created via a spinoff by May, will generate proportionate annual revenue of about €1.7 billion, and €900 million EBITDA. Read said the company would not rule out minority ownership in specific territories as long as the value for shareholders was considerable, though such a deal is currently not on the table.
“In most of the discussions we’ve been having we can get highly, highly attractive valuations with maintaining majority control or … co-control,” Read said. “And so at this point in time, we don’t have a minority situation for consideration.”
The telco continues to trim its global assets in a bid to alleviate its €48.1 billion in net debt as of November 2019. It recently announced a deal to off-load its interest in Vodafone Egypt Telecommunications SAE to Saudi Telecom Co. for €2.2 billion, following the sale of its operations in New Zealand and agreement to sell its Malta unit.
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