Cellnex Telecom today announced a joint venture transaction with Deutsche Telekom to add 3.2k towers in the Netherlands. Additionally, the transaction includes a build-to-suit (BTS) program of 180 tower sites, over the next seven years. Notably, no cash consideration is required from Cellnex, as part of this transaction.

Through this partnership, Cellnex is increasing its prospects for further organic growth in the Netherlands, a key market in Europe. Overall, Deutsche Telekom’s 3.2k tower sites in the Netherlands have a tenancy ratio of 1.2x. Indeed, this equates to 3.8k tenants with equipment on the company’s towers.

Once the deal is closed, Cellnex will operate a total of 4.3k tower sites in the Netherlands. Specifically, these Netherlands tower sites are comprised of Cellnex’s current portfolio of 984 towers, 3.2k Deutsche Telekom towers, and the 180 build-to-suit (BTS) towers.

Cellnex Netherlands Europe Portfolio

Joint Venture – Cellnex and Deutsche Telekom

Deutsche Telekom will contribute the 3.2k towers into a new Netherlands 50%/50% joint venture with Cellnex. Additionally, as part of the transaction, Deutsche Telekom will contribute €250m in debt to Cellnex Netherlands. Therefore, Cellnex’s ownership stake in the joint venture rises to 62%. In turn, Deutsche Telekom will own the remaining 38% of the share capital in Cellnex Netherlands.

As a part of the transaction, Cellnex has committed to invest €200m in the joint venture. Additionally, Deutsche Telekom has made a capital commitment of €400m in the form of the contribution of towers.

Closing of the transaction will be during the first-half of 2021.

Lease Agreement with Deutsche Telekom

Cellnex and T-Mobile Netherlands (a subsidiary of Deutsche Telekom) will sign a CPI-linked Master Lease Agreement (MLA) for an initial period of 15 years. Additionally, the lease has automatic renewals of 10-year periods, on an all-or-nothing basis.

Financial Metrics – Cellnex and Deutsche Telekom

Deutsche Telekom’s 3.2k towers currently generate €60m of revenue and ~€30m of EBITDA, after leases (EBITDAaL). At the time of transfer, Deutsche Telekom is valuing Cellnex’s 62% ownership in the joint venture at €400m. In turn, this implies that the enterprise value for 100% of Deutsche Telekom’s 3.2k towers equates to €645m. Applying the €30m of EBITDAaL to the implied enterprise value, equates to an Enterprise Value / EBITDAaL multiple of 21.5x.

Following completion of the transaction and planned build-to-suit, the deal will add €63m of EBITDA for Cellnex. Further, it will add Recurring Levered Free Cash Flow (RLFCF) of €30m, on a run-rate basis.

Cellnex in the Netherlands and Europe

Cellnex first entered the Netherlands in 2016, when it completed the acquisitions of Protelindo and Shere Group, which comprise 725 towers. Subsequently, in 2017, Cellnex acquired Alticom, which comprised 30 towers with edge computing centers. Specifically, these three acquisitions make-up Cellnex’s current portfolio of 984 sites, representing an investment of €492m.

Cellnex’s expansion in the Netherlands closely follows its recent acquisition of 24.6k towers from CK Hutchison for €10bn. Indeed, following completion of all pending deals and build-to-suit (BTS) programs, Cellnex will strengthen its position as a key Pan-European tower infrastructure provider, with a portfolio of 107k tower sites across Europe.

Adam Simmons is the Founder & CEO of Dgtl Infra. He started his career with an S&P 500-listed big box retailer, in an operations management role. Adam's entrepreneurial "itch" led him to start a 5G-driven company, focused on innovative retail solutions using augmented reality and shoppable videos, which was eventually sold to an advertising and consulting group. After, realizing the potential of 5G, Adam shifted his efforts towards investing in the "building blocks" of 5G - known as digital infrastructure, completing a number of strategic investments, buying cellular towers, data centers and fiber networks.

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