Cellnex Telecom, Europe’s largest independent tower company, today announced that it has received approval from the UK Competition and Markets Authority (CMA) to close the UK portion of its acquisition of CK Hutchison’s passive tower infrastructure. However, as part of the CMA’s approval of its acquisition of 6.0k UK sites, Cellnex will need to divest ~1.0k of its existing UK sites which overlap geographically with CK Hutchison’s UK sites. Notably, the CMA needs to approve the purchaser of these ~1.0k UK sites.
Initially, in May 2021, the CMA launched an inquiry into Cellnex’s deal with CK Hutchison. Subsequently, the inquiry was referred for an in-depth investigation by an independent inquiry group in July 2021. Ultimately, the CMA found that the sale of CK Hutchison’s UK sites to Cellnex would raise “significant competition concerns”.
Transaction Background – Cellnex and CK Hutchison
In November 2020, Cellnex agreed to acquire 24.6k tower sites throughout Europe from CK Hutchison for €10bn. Geographically, these sites spanned six countries in Europe, namely Italy (8.9k sites), the UK (6.0k sites), Austria (4.5k sites), Sweden (2.65k sites), Denmark (1.4k sites), and Ireland (1.15k sites).
UK Tower Sites – CK Hutchison
Cellnex’s allocated purchase commitment for solely CK Hutchison’s 6.0k UK sites is €2.3bn (£1.9bn). Therefore, the transaction implies a valuation of €383k (£317k) per tower. Assuming a similar valuation is achieved for Cellnex’s forthcoming divestment of ~1.0k of its existing UK sites, then the divestiture would be valued at ~€383m (~£317m).
As shown below, as of Q4 2021, Cellnex had closed transactions in 5 out of the 6 countries as part of the broader CK Hutchison deal – with the UK being the exception:
As such, today’s regulatory approval of the CK Hutchison UK deal marks the close of the final component of the broader 24.6k-site transaction.
Build-to-Suit (BTS) Towers
Beyond CK Hutchison’s existing sites, the transactions, across all markets, cover an additional investment of €1.15bn over the next 8 years which will include the deployment of up to 5.25k new sites. Geographically, these BTS sites will be in Italy (1.1k sites), the UK (600 sites), Austria (400 sites), Sweden (2.55k sites), Denmark (500 sites), and Ireland (100 sites).
UK Competition and Markets Authority (CMA) – Rationale
Cellnex’s divestment of ~1.0k of its existing UK sites which overlap geographically with CK Hutchison’s UK sites addresses the CMA’s original concerns. Specifically, the CMA noted that the sale of CK Hutchison’s UK tower sites to Cellnex would:
“Prevent the emergence of an important alternative competitor in the supply of passive infrastructure, leaving mobile networks facing higher prices and more onerous contracts in future contract negotiations. This, in turn, could result in higher prices or lower quality services for users of mobile networks across the UK over a period of time.”
Ultimately, the CMA allowed Cellnex’s acquisition to proceed given that the corresponding divestment: “will allow a major supplier to compete against Cellnex when mobile networks look to negotiate new contracts in future”. In turn, this competition “stops the threat of higher prices or worse terms for the operators and their customers as a result of this deal”.
UK Towers Market – MNOs, MNO JVs, and TowerCos
Overall, in the UK, there are currently 36,302 tower sites owned by a combination of mobile network operators (MNOs), MNO JVs, and independent tower companies (TowerCos). Below is a breakdown of the UK’s main tower owners:
- MNOs: BT/EE, Three UK (CK Hutchison), Vodafone, O2 (Telefónica)
- MNO JVs: MBNL (Three UK/CK Hutchison and BT/EE), CTIL (O2/Telefónica and Vantage Towers, formerly Vodafone)
- TowerCos: Cellnex, Wireless Infrastructure Group (Brookfield Infrastructure), Shared Access, FreshWave (DigitalBridge), Britannia Towers, WHP Telecoms, AP Wireless (Radius Global Infrastructure)