All change! The New Zealand tower industry’s wild July ride
TowerXchange covers all you need to know about the two deals that have broken this month
The New Zealand tower industry has undergone a dramatic transformation in the space of just a week. Following announcements from incumbent MNOs Spark and Vodafone NZ back in February that individual processes to find external capital in tower assets were being explored, both MNOs have announced their successful buyers hot on the heels of one another.
To help members keep track of who you need to know in New Zealand towers, TowerXchange breaks down what we know about the deals, and maps the path for the New Zealand market going forward.
12 July – Spark’s TowerCo sell 70% stake to Ontario Teachers
The first of the two deals saw “TowerCo”, the tower carve-out of Spark New Zealand, sold to Ontario Teachers’ Pension Plan (OTPP) for US$900mn. OTPP will acquire a controlling 70% interest in the TowerCo business.
Spark carved out 1,263 sites into TowerCo and has retained around 250. In line with other transactions across the Tasman Sea in Australia, the transaction valued Spark Towerco at $1.1 billion, for an FY23 Pro Forma EBITDA multiple of 33.8x.
Figure 1 – Australia and New Zealand transaction history since July 2021
Spark has entered into a fifteen-year agreement with TowerCo as anchor tenant and the new independent towerco will have a build commitment of 670 new sites to be completed over the next ten years.
Although only tower assets have been sold, comments by Spark CEO Jolie Hodson suggest that under OTPP, TowerCo will support New Zealand’s MNOs with a full suite of digital infrastructure services and assets.
“A standalone TowerCo business with sole responsibility for passive mobile infrastructure will have a single-minded focus, delivering efficiency, service innovation, and improved speed to market. This is going to be particularly important when you consider the 5G build programs of tomorrow will be very different to the 4G ones of the past, requiring many more, smaller sites, closer to the customer, and greater overall densification,” Hodson commented in a company press release.
While OTPP has significant experience investing in infrastructure assets, Spark’s portfolio marks the first major investment in telecom towers.
TowerXchange previously reported that Rob Berrill had been placed in charge of Spark TowerCo in May 2022, when he was appointed CEO, and understand that he will continue to steer the ship under OTPP.
17 July – Vodafone New Zealand sell 80% stake in 1,484 towers
Global asset management firms InfraRed Capital Partners and Northleaf Capital Partners have each acquired 40% of Vodafone New Zealand’s 1484 towers.
Vodafone New Zealand is owned by Brookfield and Infratil rather than its UK based namesake, with Infratil planning to reinvest proceeds from the sale to acquire the final 20% of the business.
Vodafone New Zealand will enter into a 20 year agreement with the new towerco to maintain access to the towers, and the deal also includes an additional 390 sites to be rolled out over the same 10 year period as Spark.
In a strikingly similar deal, the transaction is expected to complete in Q422 and has raised US$1.1 billion for Vodafone New Zealand, for an FY23 pro-forma EBITDA multiple of an identical 33.8x. Completion of the transaction is subject to Overseas Investment Office approval.
Exceeding Spark TowerCo’s site count, the new towerco will be the largest independent owner of tower assets in New Zealand, and will cover 98% of the country.
InfraRed Capital Partners is an international infrastructure investment manager with over US$12bn of equity capital in multiple private and listed funds. The acquisition marks InfraRed’s third investment in New Zealand, and its first globally in telecom towers.
In a press release InfraRed said they were supported on the acquisition of the towers by Russell Stanners, former long-term CEO of Vodafone NZ, as a senior adviser.
Northleaf Capital Partners is a global private markets investment firm with over US$20 billion in private equity, private credit and infrastructure commitments.
Northleaf has been an active investor in Australia and New Zealand infrastructure projects since 2013, but again this marks the first move into telecom towers for the Canadian based fund.
Royal Bank of Canada (RBC), Allens, Chapman Tripp, PwC, Altman Solon, Alvarez & Marsal, RPS, Colliers, and Gallaghers on the transaction. The auction process was run by UBS and Barrenjoey Capital.
Both Northleaf and InfraRed were advised by Royal Bank of Canada (RBC), Allens, Chapman Tripp, PwC, Altman Solon, Alvarez & Marsal, RPS, Colliers, and Gallaghers on the transaction. The auction process was run by UBS and Barrenjoey Capital.
About the New Zealand tower market
TowerXchange estimates that there are 4,250 towers in New Zealand that serve 6.4mn mobile subscribers for 1,505 SIMs per Tower. SIM Penetration sits at 125.9%. In addition to Spark and Vodafone New Zealand, the MNO market is completed with relative newcomer 2degrees.
Figure 2 – Mobile market share in New Zealand
Prior to the announcements of outsider capital being explored for the two tower portfolio’s early this year, there were signs of a nascent tower sharing culture emerging in New Zealand. Spark and Vodafone have substantial but ageing tower networks and newer entrants 2degrees have leveraged co-location where possible while building a few hundred towers themselves.
Upgrading the towers to support the co-location necessary for a profitable tower business is likely to be a priority for the two new companies.
2degrees may also have an appetite to sell their towers, and could now partner with the two new independent towercos on their build-to-suit and co-location requirements.
Parallel infrastructure is substantial in New Zealand, while the need for improved rural coverage, particularly on the South Island where tourist and agribusiness drive demand, has prompted the government’s Rural Broadband Initiative (run by Crown Infrastructure Partners) to invest in over 100 towers - particularly along transport routes.
In early 2021, Vodafone New Zealand announced a “turbocharged” digital infrastructure investment programme. The milestone 250th tower was completed as part of this project in June 2021, and was built by the Rural Connectivity Group.
The Rural Connectivity Group is a joint venture run by all three of the nation’s MNOs to develop rural connectivity and eliminate mobile blackspots. The Rural Broadband Initiative has also committed NZD10 million (US$7.06mn) to deploy suitable radio spectrum in more rural areas.
It is expected that this will vastly improve broadband capacity and coverage in the long-term, as the 600MHz band is better suited to 5G.
Clearly there is work to be done to support New Zealand’s connectivity in the future, which the 1,060 new towers commissioned as part of the two transactions will no doubt support.
Want to learn more?
TowerXchange will be inviting everyone you need to know in the new look New Zealand tower market to Meetup Asia – to be held 29-30 November 2022 in Singapore. If you would like to join them please get in touch with Jack Haddon – email@example.com for more information.