In a year where telecom tower sales have come thick and fast, it seems fitting that 2022 should end with a flurry of sale and leaseback transactions across APAC.
The New Zealand market has transformed in 2022. From no towerco activity whatsoever in January this year, New Zealand is now home to two towercos who between them control 100% of the countries 4250 sites. This comes as Connexea (which was formed following a 70% stake purchase by OTTP in Spark New Zealand’s Towers) has agreed to acquire the portfolio of the newest MNO in the country – 2degrees.
Over in the Philippines, Smart have reached an agreement to sell 650 of 2000 towers it earmarked for a sale in October this year with Unity Digital Infrastructure. But that might not be all. In Indonesia, one of the last portfolios of MNO controlled towers could be sold by the end of the year, as Indosat Ooredoo Hutchinson are rumoured to be targeting a Sale and Leaseback before we reach 2023. If this sale goes through, then Indonesia would join China, New Zealand & Australia in an exclusive club of APAC countries with zero towers owned by MNOs.
Figure 1 - Towerco Penetration Heatmap (Pre-Spark/2Degrees transaction)
The most expensive SLB ever?
Connexea was formed in July as Spark New Zealand TowerCo. Spark sold 1,263 towers to Ontario Teachers’ Pension Plan (OTPP) for US$900mn, with OTPP acquired a controlling 70% interest in the TowerCo business. The deal closed in October and Spark TowerCo rebranded to Connexea in November 2022.
New Zealand is home to three MNOs; Spark, Vodafone New Zealand and 2degrees. Vodafone New Zealand announced a deal to sell 1484 towers to InfraRed Capital Partners and Northleaf Capital Partners, whom each acquired a 40% stake of the new Business.
2degrees have completed the trifecta by consolidating the market with a sale to Connexea. 2degrees currently owns and operates approximately 1,124 mobile towers located across Aotearoa New Zealand. The deal was valued at US$1.08 bn which on a price per tower basis (US$960,854) makes this the most expensive Sale and Leaseback deal that TowerXchange has ever recorded, although it should be noted that we don’t track North American tower transactions.
Figure 2: Tower sales and new build commitments in New Zealand in 2022:
Under the terms of the deal, 2degrees has entered into a 20 year-agreement with Connexa (plus rights of renewal) to secure access to existing and new towers, with an additional tower build and co-location commitment of 450 sites over the next 10 years.
This brings the total number of new towers planned for New Zealand to 1510. In addition to the 450 sites Connexea will build for 2degrees, a 670 site build to suit program is planned with Spark, although it is possible that one co-located site could serve both MNOs and reduce this number.
Vodafone New Zealand’s towerco also secured a 390 tower build to suit pipeline as part of its own transaction.
The 1510 sites will all be delivered within a 10-year window as per the terms of the three transactions. The towers will likely be built with two purposes in mind: densification of New Zealand’s Urban networks as 5G rollouts continue in the country and coverage of rural blackspots.
5G is live in parts of Auckland, Hamilton, Bay of Plenty, Manawatū-Whanganui, Taranaki, Wellington, Christchurch, Queenstown, Southland and MNOs have amassed 629,000 subscribers in a population of 5.1 million.
The Rural Connectivity Group, a joint venture between all three MNOs, has been fulfilling the latter of these task over recent years, promoting a RAN sharing model and building over 300 sites as of the end of 2021. In addition to improving the service available to rural New Zealanders, The Rural Connectivity Group has been focusing on ensuring coverage at remote tourist locations, specifically on the south-Island, and has also ensured that a significant amount of the countries highways have mobile coverage.
OTTP will be contributing all the additional equity capital required to complete the acquisition which means following its closure, Ontario Teachers’ shareholding will increase to approximately 83% and Spark’s shareholding will reduce to approximately 17% of Connexea.
In a press release, Connexea CEO Rob Berrill said: “With the addition of 2degrees’ mobile towers and the committed build to suit programme, we will be able to achieve greater operational efficiencies through increased infrastructure sharing, which means fewer unnecessary mobile tower builds in local communities and faster deployment of towers to improve network coverage and capacity across Aotearoa”
More towers change hands in The Philippines
Within 24 hours of the Connexea/2degree’s sale being announced, PLDT announced that Smart was selling more towers. The Filipino MNO is close to finalising the transfer of 5,907 towers to EdgePoint and edotco, in separate deals that were announced in April of this year. In October it was rumoured that PLDT were planning to sell 2000 more towers, and these reports were confirmed by the operator in November.
The first 650 of this 2000 are set to be inherited by Unity Digital Infrastructure, for a sum of PHP 9.2 billion (US$166m). Unity Digital Infrastructure has been building towers in the Philippines since the end of 2020, and is owned by local investment firm Aboitiz Infra Capital, as well as international Private Equity house Partners Group.
The towers that will be purchased are situated in the Visayas and Mindanao areas, which provides Unity a high-quality portfolio of strategic locations across the country according to their press release on the matter.
In addition to the towers it has now bought, Unity Digital Infrastructure has constructed 265 macro towers in the Philippines and has built around 500 poles for small cells in key cities nationwide.
The deal brings Smart in line with competitor Globe in terms of 2022 tower transactions, with both operators sitting at three apiece.
Globe has sold towers to MIDC, Frontier Tower Associates and PhilTower this year in three deals that represent around half of its portfolio.
Is there one more bullet in the chamber of 2022 APAC M&A?
While these two deals could bring to a close a very busy 2022 on the M&A front in APAC, there is potential for another transaction to close this chapter.
Recently merged Indonesian MNO Indosat Hutchinson Ooredoo (IOH) has plans to offload 1850 towers and TowerXchange has learnt it is trying to conclude an agreement by the end of the year.
Interested parties could include local towerco Tower Bersama, who recently secured new funding from PSP Investments and Macquarie. EdgePoint Infrastructure will also be a contender, having been the latest towerco to acquire towers from either Indosat Oordeoo or Hutchinson in a March 2021 transaction with Indosat.
Protelindo, the largest independent towerco in the country, last bought towers from an MNO in 2020 when it acquired 1,728 sites from Axiata, but did also acquire another independent towerco in the form of STP in 2021.
Mitratel, Telkomsel’s MNO led towerco, has recently acquired towers from its parent company, but has IPO capital that it is ready to put to work diversifying its digital infrastructure offering and will no doubt be interested in boosting its large portfolio of towers.
EDOTCO are also now present in the Indonesian market after acquiring Axiata towers in January, as are American Tower, who have started to explore options for expansion in Indonesia.
Figure 3: Estimated Tower Ownership in Indonesia
Besides the already active towercos, there could be a number of international investors that would see the mature Indonesian market as a great opportunity to acquire assets, so competition will be fierce.
Can IOH get the deal done by the end of the year? We don’t have long to wait to find out!
If you want to know what else happened this year in APAC towers check out our 2022 news roundup.
