Telenet Group, a wireless carrier in Belgium which is 60.7%-owned by Liberty Global, has been named in press reports from Bloomberg noting that it is working with investment bank Goldman Sachs on a “potential divestment” of its portfolio of over 3.0k towers in Belgium, which could command a value of at least €600m ($690m).
Notably, this report follows Liberty Global’s CEO, Mike Fries, stating on the company’s Q2 2021 conference call that (as Telenet’s majority owner) it has “begun the process of monetizing hidden assets in our OpCos like towers in Holland, Belgium, and the UK”. Likewise, Telenet Group’s CEO, John Porter referred to the company’s towers on its Q2 2021 conference call, noting that Telenet is “very, very far down the road, if not almost complete on prepping the asset for a potential transaction”.
With this dynamic in-play, we breakdown the tower infrastructure portfolio of Telenet and its rationale for divesting of the infrastructure.
Towers Portfolio in Belgium – Telenet Group
Telenet owns a portfolio of over 3.0k towers in Belgium. Of this total, 2.25k or 75% are rooftop sites and 0.75k or 25% are ground-based towers. In Belgium, tower sharing is mandated by regulation. As a result, Telenet shares the majority of its sites with wireless carriers Proximus and Orange Belgium.
Based on the indicative valuation of €600m, Telenet’s 3.0k towers would command a valuation of €200k per tower. Indeed, this modest ‘per tower’ valuation is in-part because of the significant 75% weighting of rooftop sites in the portfolio.
Transaction Rationale – Telenet Group
Telenet, by divesting its Belgium tower assets, will crystalize the value of its tower infrastructure portfolio. To this end, the company trades at an EV/EBITDA multiple of 6.5x to 7.0x, which is a considerable discount to the EV/EBITDA multiple of recent European tower precedent M&A transactions, with valuations averaging ~25x on an EV/EBITDAaL basis.
Beyond capturing the latent value of its tower assets, Telenet Group’s CFO, Erik Van den Enden has stated on the company’s Q1 2021 conference call that Telenet needs to have a “strategic rationale” and “strategic use of the proceeds” to pursue a sale of its tower infrastructure. For example, Telenet’s use of proceeds could be any of the following:
- Fiber-to-the-Home (FTTH) Roll-Out: Telenet is the second largest fixed broadband provider in Belgium with 1.7 million subscribers. However, a significant portion of the company’s network still leverages hybrid fiber-coaxial (HFC) infrastructure. Indeed, HFC networks are under pressure from fiber provider competition, such as Fiberklaar, a joint venture between EQT and Proximus
- Acquisition: Belgium cable operator VOO is currently for sale, with Telenet being one of the likely acquirers
- Debt Paydown: Telenet could reduce its leverage, which currently stands at 4x net debt / EBITDA
- Capital Return: special dividend or share buybacks are also possibilities