In August 2023, at A1 Telekom Austria’s Extraordinary General Assembly, shareholders agreed the spin-off of its towers in Austria and their management under the EuroTeleSites towerco. The newest Vienna-headquartered European towerco started operations in September and will manage the already carved out assets in Bulgaria, Croatia, Serbia, Slovenia and North Macedonia as well as the recently spun off towers in Austria with the total towers held by the entity understood to be around 13,225 sites.
Everything we know about telecom towers in CEE
Another multi-country present operator, Deutsche Telekom (DT) has recently completed the carve out of its passive infrastructure in the Czech Republic into T-Mobile Infra CZ and is in the process of carving out its Slovakian towers. The operator had previously carved out assets in Germany (over 20 years ago) and Austria (more recently) and sold a 51% stake in the combined entity (GD Towers) to DigitalBridge and Brookfield.
In Deutsche Telekom’s latest results call, CEO Tim Hottges explained that no decision had been made on how they would monetise the Czech and Slovak assets but commented that they could be sold to the market or to their partner (GD Towers) at a later stage. Deutsche Telekom also owns tower assets in Romania but is yet to announce a formal carve out or any other details. Telekom Romania is rumoured to be up for sale as it is the only MNO on the market that has not taken part in the 5G spectrum auctions.
The Czech Republic-based PPF Group has recently completed the separation of its network infrastructure in Slovakia into O2 Networks. According to the group “the separation of network management into a separate entity aims to streamline the operations and management of the construction and operation of physical infrastructure.”
In August, the PPF Group and UAE’s e& announced e& will acquire majority stakes (50% +one share) in PPF Group’s assets in CEE, excluding the Czech Republic. The new partnership covers Slovakia, Hungary, Bulgaria, and Serbia and includes PPF’s MNO units Yettel in Bulgaria, Hungary, Serbia, Slovakia as well as the infrastructure companies in Bulgaria, Hungary and Serbia (CETIN), and in Slovakia (O2 Networks) for up to EUR2.5bn. The deal will also include corporate reorganisation within the PPF Group with O2 Czech Republic and CETIN’s Czech operations excluded from the transaction. PPF has said it plans to create synergies between all its companies operating in the Czech Republic.
At present CETIN have 2,800 sites in each of Bulgaria and Hungary, in Serbia they own 1,700 and TowerXchange estimates O2 Networks manages approximately 1,800 sites in Slovakia. CETIN and O2 Networks manage much more beyond towers, they take ownership of metallic cable pairs, fibre and indoor and outdoor base stations.
Another type of partnership was also announced in August 2023 - between O2 Networks and Slovak Telekom who will share their mobile networks as they look to reduce costs and improve service coverage. The network sharing programme will be rolled out gradually over the next two to three years. Both parties have confirmed that the agreement would not cover the country’s two main cities – the capital Bratislava and Kosice.
In addition to the developments in the telecom infrastructure landscape, in Q1 2023 Antenna Hungaria (owned by 4iG) swapped its 25% stake in the Hungarian subsidiaries of PPF Telecom Group Yettel and CETIN for 19.5% of Vodafone shares, increasing its stake in Vodafone Hungary to 70.5% and ceasing to have any shareholding in Yettel and CETIN. 4iG, via Antenna Hungaria, and in partnership with the Hungarian state, completed the acquisition of Vodafone Hungary earlier in 2023.
This is not the first deal that the PPF Group has struck with 4iG on the Western Balkans. Having entered the markets of Hungary, Bulgaria, Serbia and Montenegro in 2018 by buying 100% of the shares from Telenor for EUR 2.8 billion, the Group exited Montenegro by selling its business there to 4iG in end-2021 for an undisclosed amount. PPF has said the sale is in line with its business strategy that “focuses on markets offering significant growth potential and solid weighting within our portfolio.”
The PPF Group has said earlier in 2023 it is looking for acquisitions in Europe with telecom, finance, media, e-commerce being key growth areas. CETIN recently acquired the Czech ISP Nej.cz for an undisclosed amount and the deal includes three data centres and high-speed fibre-optic infrastructure which reaches 500,000 homes in the Czech Republic to which it provides mainly internet access, IPTV and voice services.
What other developments have happened in the CEE tower space?
In August 2023, the Bulgarian Regulator, the Commission for Protection of Competition (CPC), gave regulatory clearance to TAWAL for the purchase of 3,200 assets in Bulgaria from United Group which owns MNO Vivacom. Following the April 2023 announcement (which also includes another 1,600 assets in Croatia and Slovenia), Vivacom’s sites are now wholly owned and managed by TAWAL Europe.
In early October 2023, Maltese MNO GO announced it has sold its 280 sites to local data centre and IT service provider BMIT Technologies for EUR47.1mn (USD$49.8mn). The deal also includes a BTS program of around 30 sites to support GO’s ongoing 5G rollout and network coverage requirements across Malta by 2030. GO will remain as the anchor tenant on the sites. Once closed, the deal will allow GO to focus on its core business operations and end-customers, “resulting in operational advantages" and will bring another towerco in the country, or infraco in the case of BMIT Technologies, in addition to Phoenix Tower International who acquired telecom assets there in 2021.
What could we expect next in CEE?
All these developments signal there are still growth opportunities in the CEE region with appetite from MNOs and investors from different continents.
M&A activity has been strong in Europe with suitors being of various shapes and sizes.
According to earlier reports in Bulgarian media, PTI, CETIN and Cellnex had been among the suitors for United Group’s sites earlier in 2023 but TowerXchange has not been able to verify this.
Cellnex has said it will focus on its balance sheet, rather than M&A in the near future and with ATC leaving the Polish market by selling its sites to Emitel for an undisclosed amount, these two players look unlikely to invest in infrastructure in CEE.
Despite many talks that the European passive infrastructure market is to undergo consolidation, big players such as DT have not announced plans for the mobile infrastructure of their units in Romania where we can expect to see carve outs next. In May 2023, DT announced it is looking at “strategic options” for Telekom Romania Mobile Communications. In Greece, DT owns 50% in OTE which in turn owns 100% in MNO Cosmote. OTE announced an administrative restructuring to simplify the organisation in Greece which will have no financial impact and no plans have been made public about the towers.
Vodafone has already carved out its infrastructure which it manages under the Oak Holdings co-control partnership with KKR and GIP.
Orange has announced it is looking into spinning off its assets so we could see its Romanian sites being next. An Orange carve-out in Poland seems less likely as the tie-up of their Polish towers into a joint venture with DT complicates carve-out plans in the country.
Telia and Elisa have not announced any plans for their Baltic operations or potential moves into the CEE markets. TowerXchnage understands that for Elisa no carve-out plans in the Baltics are on the cards.
At TowerXchange Meetup Europe in May 2023, Brookfield’s Managing Partner and Chief Investment Officer Sikander Rashid said that CEE is behind the digitalisation curve compared to the rest of the continent. With data growth 20% faster than in Western Europe, there is a shortage of overall tower infrastructure, and the CEE market will continue to grow at a faster rate relative to Western Europe. The country risk on the east of the continent can be slightly higher relative to some of the Western European countries like Germany or France for example. The outcome of geopolitics, which is a little uncertain at the moment, will play a role in future M&A activity. But with hints from TAWAL and that they will be opportunistic, and they do have ambitions to potentially expand their footprint in Europe, it’s just a matter of time until the right opportunities for the next deals materialise.
Taking a definition of CEE that includes 17 markets (see table below), towercos now operate in 10, yet towerco penetration in the region stands at 38% (versus 70.4% for Europe as a whole).
Tower sales by two Polish operators to Cellnex, PPF Group’s formation of netcos CETIN and O2 Networks (in which ownership will shift to e&), Vodafone’s carve out Vantage Towers (in which it has since sold a majority stake to KKR, GIP & PIF), Telekom Austria’s carve out of A1 Towers (now managed by the EuroTeleSites towerco), Deutsche Telekom’s carve out of its Czech, and soon Slovakian assets and United Group’s tower sale to TAWAL have all moved the needle in terms of tower ownership.
What kind of interest could we see from towercos and investors in such assets? Perhaps portfolios from smaller MNOs in markets where there is yet no towerco present are unlikely to garner a huge amount of interest, but in markets where towercos already have a presence, there may be an appetite for bolt on acquisitions. Plus the region’s larger markets and portfolios may attract a larger cohort of suitors.
