TPG Telecom, the third largest wireless carrier (branded as Vodafone Australia) and fixed broadband provider in Australia, today announced it is “undertaking a strategic review of its telecommunications tower assets”, which includes rooftop sites and ground-based towers. Notably, this decision closely follows Telstra announcing the sale of a 49% stake in its InfraCo Towers at an A$5.9bn valuation. Additionally, Optus disclosed that it is auctioning a 70% stake in its newly formed A$2.0bn+ tower company.
Tower Infrastructure – TPG Telecom
TPG Telecom operates 5.8k rooftop sites and towers in Australia. However, the company only owns the passive infrastructure on ~1.2k of these sites, equivalent to ~20% of the sites. Specifically, the company notes that it has long-term arrangements to access Axicom’s portfolio of tower assets and a joint venture agreement with Optus. These two partnerships account for the majority of TPG Telecom’s non-owned sites:
- Axicom: owns a portfolio of ~2.0k towers in Australia – the company is backed by Macquarie Infrastructure and Real Assets (MIRA)
- Optus: joint venture agreement comprises 1.8k towers in Australia
Finally, the majority of TPG Telecom’s 1.2k owned sites are located in metro areas, with a high average tenancy ratio.
Valuation Framework – TPG Telecom’s Towers
In terms of valuation, TPG Telecom’s 1.2k owned sites is the relevant metric to apply a valuation benchmark. Importantly, any transaction would take the form of a long-term sale-and-leaseback agreement with TPG Telecom.
Tower Valuations in Australia
Below are two relevant benchmarks for TPG Telecom’s towers from Telstra’s recently announced 49% stake sale and Optus’ reported valuation in its ongoing auction process.
- Telstra: A$5.9bn valuation for Telstra’s 5.5k towers equates to an Enterprise Value per tower of ~A$1.0 million per tower
- Optus: A$2.3bn valuation for Optus’ 2.3k tower sites, implies an Enterprise Value per tower of A$995k per tower
Given that TPG Telecom’s tower portfolio is materially smaller than Telstra and Optus’ portfolios, it will likely not command the same premium valuation. Nevertheless, assuming a similar valuation to Optus’ potential transaction of A$850k per tower, implies a value for TPG Telecom’s 1.2k owned sites of ~A$1.0bn.
Digital Infrastructure – Fiber, Subsea Cables
Beyond tower infrastructure, TPG Telecom owns a significant amount of digital infrastructure in the sub-sectors of fiber and subsea cables. Below is a breakdown of TPG Telecom’s non-tower digital infrastructure portfolio:
- Terrestrial Fiber: 17.4k route miles (28.0k route kilometers) of metro and long-haul fiber networks. Overall, this network connects 13.0k enterprise buildings with fiber (i.e., on-net buildings)
- Subsea Cables: owns the PIPE Pacific Cable-1 (PPC-1) which spans 4.5k miles (7.2k kilometers) overall. Specifically, this subsea cable connects Australia, Papua New Guinea, and Guam
- Fixed Broadband: 400k homes passed by fiber, VDSL, and hybrid fiber-coaxial (HFC) networks
- Small Cells: 400+ nodes
- PoPs: 400 national points of presence (PoPs), including data centers
