Deutsche Telekom AG agreed to sell a majority stake in its towers unit to Brookfield Asset Management Inc. and DigitalBridge Group Inc. in a deal that values the business at 17.5 billion euros (US$17.5 billion), one of the largest digital infrastructure deals this year.
Deutsche Telecom sold a 51 per cent stake in the German and Austrian unit, called GD Towers, for 10.7 billion euros in cash, according to a statement on Thursday. The proceeds will be used to lower the German telecom company’s debt levels and fund its plan to increase its stake in T-Mobile US to 50.1 per cent, it said.
The Canadian investment firm and US infrastructure investor teamed up in a last-minute bid for the stake, emerging as the frontrunner ahead of a KKR & Co.-led consortium, Bloomberg News reported yesterday. Brookfield’s previous partner, Cellnex Telecom SA, had dropped out of the bidding.
Europe’s phone carriers used to insist on ownership of their infrastructure including masts and fixed networks, but after facing pressure to share the bill for expensive investments into fiber optics and 5G, combined with large debt piles and stagnant share prices, they’ve started to spin off or sell the businesses.
“I have always championed an industry solution,” said Thorsten Langheim, USA and Group Development at Deutsche Telekom, adding that antitrust issues were a potential issue if a deal was struck with a rival. “It wasn’t the right time but we won’t discard this as an opportunity going forward.”
Vodafone Group Plc’s listed infrastructure arm Vantage Towers AG was among the suitors studying the business earlier, Bloomberg News has reported.
Deutsche Telekom’s shares fell 0.9 per cent in early trading on Thursday.
DigitalBridge, which has a market value of about US$3 billion, manages almost US$47 billion of assets solely focused on digital infrastructure such as wireless towers, data centers, fiber networks and edge infrastructure, according to its website.
The transaction is subject to usual regulatory approvals and closing is expected toward the end of 2022, Deutsche Telekom said.
The sale of a stake in Deutsche Telekom’s tower business is set to rank as one of the largest European infrastructure deals this year, according to data compiled by Bloomberg.
Institutional investors have been drawn to wireless towers because of their ability to generate steady, long-term returns. KKR raised US$17 billion for its latest global infrastructure fund earlier this year, while Global Infrastructure Partners is targeting US$25 billion for what would be the world’s biggest pool of capital dedicated to infrastructure investments.