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.

Roll-Out

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.

Contract

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.

Financials

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:

Vantage Towers

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.

1&1

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.

Fiber

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.

Data Centers

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).

Adam Simmons covers Towers for Dgtl Infra, including American Tower (NYSE: AMT), Crown Castle (NYSE: CCI), SBA Communications (NASDAQ: SBAC), Cellnex Telecom (BME: CLNX), Vantage Towers (ETR: VTWR), IHS Holding (NYSE: IHS), and many more. Within Towers, Adam focuses on the sub-sectors of ground-based cell towers, rooftop sites, broadcast / radio towers, and 5G.

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