Vodafone joins together with KKR and GIP in a $16 billion tower transaction

Vodafone has agreed to sell a portion of its masts subsidiary Vantage Towers to Global Infrastructure Partners (GIP) and KKR, forming a joint venture that will generate at least 3.2 billion euros in revenues to help reduce the telecoms operator's debt.

According to Vodafone, a consortium led by the two infrastructure investors and supported by Saudi Arabia's national wealth fund will buy up to half of Vodafone's 81.7% holding in Vantage, with the joint venture offering to buy out minority shareholders at a price of 32 euros per share.

Vodafone CEO Nick Read said the transaction, which valued Vantage at 16 billion euros ($16 billion), satisfied his goals of keeping co-control of the infrastructure required to put out 5G networks while extracting value and removing it from the British group's financial sheet.

According to him, putting the interest in a joint venture with long-term investors KKR and GIP would allow it to attain the higher debt multiples characteristic of infrastructure investments.

"This considerably boosts Vantage Tower's financial flexibility to capture future organic and inorganic development possibilities," Read told reporters.

Depending on how many minority investors agree to sell their shares and how much of Vodafone's holding GIP and KKR agree to purchase, Vodafone will earn cash proceeds ranging from 3.2 billion euros to 7.1 billion euros, which will all be used to decrease debt, he said.

According to Read, the consortium will purchase at least 32% of the joint venture, with the goal of reaching 50% by next June.

KKR, which was rumoured to be in pole position after missing out on a Deutsche Telekom towers sale earlier this year, restructured its relationship with GIP to pursue Vantage.

Last year, Read broke out Vodafone's European towers into a separate publicly traded company as a prelude to a partnership with another industry participant, such as a tower operator or infrastructure fund.

His first option had been to join Vantage with an industry partner, but bringing in private equity money was an option as well.

Analysts argued that choosing the later option removed difficult anti-trust barriers.

Minority shareholders will be compensated 32 euros for their Vantage shares, a 19% premium over the last three months' average price and 8 euros more than it debuted at in March 2021.

Vantage shares, which have 83,000 locations across ten countries, were up 12% at 32.8 euros in afternoon trade.

Vodafone's investors, which have included French telecoms billionaire Xavier Niel since September, have been waiting for Read to deliver on his commitment to monetize assets and promote mobile market consolidation.

The debt decrease should give him some breathing room as he pursues mobile agreements, including a merger with Hutchison's Three in the United Kingdom.

The market, however, responded unfavourably to the conditions of the agreement, with Vodafone's shares plunging more than 2% to trade at two-year lows.

(source : REUTERS)