Vantage Towers, the second-largest tower company in Europe, today announced that it has signed a 20-year contract with 1&1, a wireless carrier in Germany, to provide 1&1 with access to colocation on up to 5.0k of its existing sites. Specifically, 1&1 is gaining access to Vantage Towers’ passive infrastructure, including ground-based towers and rooftop sites, as part of its build-out of Germany’s fourth wireless network.
Vantage Towers and 1&1 Partner in Germany
Vantage Towers is providing colocation on its tower infrastructure to facilitate 1&1’s 5G network build-out in Germany. Initially, the first sites from Vantage Towers will be made available to 1&1 starting in 2022.
By the end of calendar year 2025, 1&1 will gain access to at least 3.8k of Vantage Towers’ existing sites throughout Germany, for the next 20 years. Subsequently, 1&1 has the ability to scale-up and colocate on up to 5.0k of Vantage Towers’ existing sites.
Vantage Towers notes that 1&1 will deploy its antennas and radios “predominantly” on existing sites, with certain new antenna locations still to be constructed. Also, Vantage Towers will perform the installation of 1&1’s 5G antennas on its towers as well as provide services relating to approval procedures and preparatory work.
Vantage Towers’ contract with 1&1 has an initial term of at least 20 years, expiring at the end of 2040. Furthermore, the contract can be extended several times by 1&1, with renewal options lengthening the agreement to 2060.
Vantage Towers states that the “contract value is in the high three-digit to lower four-digit million euro range”, which is equivalent to ~€800m to ~€1.2bn.
Transaction Rationale – Vantage Towers and 1&1
Below is rationale for the tower infrastructure agreement between Vantage Towers and 1&1:
For Vantage Towers, this partnership represents an opportunity to increase the utilization on a portion of its 19.4k sites in Germany – which is Vantage’s largest market. As of September 30, 2021 (H1 FY22), Vantage Towers’ tenancy ratio in Germany was only 1.22x. As such, the 1&1 partnership will contribute to increasing this metric.
Additionally, Vantage Towers notes that its medium-term consolidated tenancy ratio target of >1.5x is now “highly secured” as a result of the additional 3.8k tenancies contracted with 1&1. As a reference point, as of H1 FY22, Vantage Towers had a consolidated tenancy ratio of 1.42x.
Overall, 1&1’s partnership with Vantage Towers enables the wireless carrier to progress on its plans for its tower infrastructure deployments, which are as follows by year-end:
- 2022: build-out 1.0k wireless sites
- 2025: build-out 6.5k wireless sites to satisfy its obligations to cover 25% of Germany’s population
- 2030: build-out 13k wireless sites to satisfy its obligations to cover 50% of Germany’s population
Colocation on Vantage Towers’ sites enables 1&1 to progress with the roll-out and launch of its 5G network in Germany, rapidly and cost-effectively. Indeed, by partnering with tower companies, 1&1 will primarily use existing sites to deploy its antennas and radios.
To this end, Vantage Towers is 1&1’s first partner for passive network infrastructure. Therefore, potential future agreements could be forthcoming with other tower companies that have a presence in Germany, including American Tower, Tillman Infrastructure, and/or Deutsche Funkturm, a subsidiary of Deutsche Telekom.
1&1 – Fiber Connectivity and Data Centers
In addition to tower infrastructure, 1&1 has made progress on securing additional components of digital infrastructure necessary for its 5G network build-out – namely fiber and data centers. Particularly, 1&1 is leasing fiber-optic lines and data center infrastructure from its affiliate 1&1 Versatel Deutschland GmbH. This lease has an initial term to the end of 2050.
1&1 will lease fiber-optic connectivity from 1&1 Versatel, ensuring that all of its antennas will have fiber-optic connections. Notably, 1&1 Versatel owns one of Germany’s largest fiber-optic transport networks. In turn, the company will be responsible for 1&1’s access network, in particular fiber-optic lines.
1&1 will also lease data centers from 1&1 Versatel, who will operate the facilities. Specifically, the companies have plans for 4 central data centers for the core network. Moreover, these facilities will be connected to 500+ decentralized edge data centers, which will be newly constructed. Ultimately, 1&1’s antenna sites will connect via fiber to these edge data centers.
With this network architecture, 1&1 enables short transmission paths (i.e., low-latency), which is essential for real-time applications.
Vantage Towers Portfolio – September 30, 2021
Vantage Towers’ consolidated site portfolio includes its operations in Germany, Spain, Greece, the Czech Republic, Portugal, Romania, Hungary, and Ireland. In addition, Vantage Towers has a 33.2% stake in INWIT (Italy), and 50% stake in Cornerstone (UK).
As of September 30, 2021, Vantage Towers’ sites totaled 45.6k, across 8 European markets. Specifically, this portfolio includes 19.4k sites in Germany and 8.6k sites in Spain – the company’s two largest markets. Finally, the company’s portfolio comprises towers, masts, rooftop sites, small cells, and distributed antenna systems (DAS).