TAWAL sets foot in Europe
Saudi Arabian towerco TAWAL acquires over 4,800 towers from United Group in 3 Eastern European markets
TAWAL has signed an agreement to acquire over 4,800 towers for United Group across three markets in Bulgaria, Croatia and Slovenia, valued at €1.2bn (US$1.34bn). The portfolio is a mix of ground-based, rooftop and small cell sites, as well as a handful of In-Building Solutions (IBS). The 20-year Master Service Agreement also includes an additional 2,000 build-to-suit sites.
The agreement marks a milestone for TAWAL as the towerco’s first international expansion and comes hot off the heels of their launch of operations in Pakistan, their first venture outside the core market of Saudi Arabia, back in February. The acquisition supports parent-company STC Group’s strategy to expand its international footprint in “key markets with significant growth potential”.
Mohammed Alhakbani, Chief Executive Officer of TAWAL, said “the partnership supports our goal to continue to provide innovative and efficient ICT infrastructure solutions to our partners and deliver the quality of services we are renowned for”.
The transaction is currently subject to regulatory approval in Bulgaria and Slovenia. Once complete, the operations will become rebranded under ‘TAWAL Europe’ and will serve as a strong platform for future expansion opportunities across the European continent.
Who is TAWAL?
TAWAL was carved-out from Saudi Arabian incumbent MNO stc Group in 2018 and is the largest towerco in the Middle East with almost 16,000 towers under management in the region. The towerco has since been driving up colocations on their sites and taking over network rollout from MNOs Mobily and Zain KSA.
TAWAL has long had a vision to become a leading ICT infrastructure service provider. The Kingdom has an ambitious digital transformation initiative and launched numerous smart cities and megaprojects including NEOM, the Red Sea project and Diriyah, and TAWAL is pioneering new digital infrastructure solutions piloting small cells and is deploying in-building solutions having received an IBS license back in 2020.
TAWAL has been highlighting their ambitions to become a regional and international towerco for some time, and recently launched their first operations outside the Kingdom in February, acquiring 100 sites from AWAL Telecom in Pakistan. With massive network rollout demands from MNOs, Pakistan is a highly active build-to-suit market and the towerco has ambitious plans to grow organically in the market.
TAWAL is also backed by Saudi Arabia’s sovereign wealth fund PIF, which has launched 5 regional investment companies in Jordan, Bahrain, Sudan, Iraq and Oman following the set-up of an Egyptian branch, targeting investments of up to $24bn in sectors including technology and infrastructure.
Who are United Group
Active in nine countries, namely Bulgaria, Bosnia and Herzegovina, Croatia, Greece, Montenegro, North Macedonia, Serbia, Montenegro, Slovenia, United Group is a well-diversified telecoms and media company and has nearly 11 million users and about 14,500 employees.
United Group has been highlighting its strategy to provide all telecommunication services (landline, mobile, television, and internet) in one household across the CEE region.
In late 2020, United Group also entered the e-commerce space by launching its Shoppster.com platform in Serbia and Slovenia. Through this initiative, United Group is looking to further leverage its telco-media ecosystem and create new revenue streams.
In Bulgaria, which is the group’s largest market in terms of revenue (approximately 29%), United Group owns the MNO Vivacom as well as TV, online and radio company Nova Broadcasting Group.
United Group plans also include investments in its mobile and fibre network, and is accelerating its rollout of 5G mobile services in CEE. The group has spent €51.6 million to acquire new frequencies for Telemach Slovenia in Slovenia’s 5G auction and €2.3 million in Bulgaria’s 5G auction.
United Group has completed 150 M&A deals in CEE of various shapes and sizes in the past 20 years. Since 2020, the Group has hugely increased its presence by acquiring Bulgaria's MNO Vivacom and Nova TV, Croatia's Optima Telekom and Greece's Wind as well as 20 smaller ISPs in the CEE region.
United has invested €1.8bn in Bulgaria in the past three years and has announced plans to invest a further €600 million over the next three years. It has also launched a telecommunications infrastructure improvement project in Greece worth €5bn across the next five years.
The Netherlands-based group develops its products in-house at five R&D centers called United Cloud and located in Serbia, Slovenia and Switzerland and plans to open more in Bulgaria, Croatia and Greece.
Since March 2019, United Group has been majority-owned by UK-based private equity firm BC Partners which holds just slightly over 50%. United Group's founder Dragan Solak owns 40% while the European Bank for Reconstruction and Development (EBRD) and the company's management are minority stakeholders.
What this means for towers in Eastern Europe
United Group has announced plans to use some of the proceeds of the sale to increase liquidity and to pay its near-term bond maturities totaling €525 million in Q4 2022 which have fallen deeply amid soaring inflation and rising interest rates.
United Group’s announcement to separate its tower assets “following an industry trend” creates another monetisation opportunity for the stakeholders involved in the process.
In addition to the cash flow for the group and CEE, the entrance of a new player for the region changes the landscape and competitive environment, setting a precedent for more such deals to follow. But above all, the importance of the region whose development has lagged behind Western Europe has increased, putting higher price tags on other infrastructure assets here, which should in turn attract further investment and M&A activity.
According to earlier reports in Bulgarian media United Group's assets were contested by Phoenix Tower International, the PPF Group, 4iG and Cellnex. Other sources also mention another bidder from the Middle East.
How does the deal compare to other recent deals?
TAWAL’s acquisition of United Group sites puts a per-tower price tag of approximately EUR 250,000. Although highly priced for the region, the transaction value is lower compared to other deals that have recently been completed in the region. For example, the DigitalBridge and Brookfield deal for the acquisition of a 51% stake in GD Towers had a €17.5 billion enterprise value, while Vodafone’s sale of 81.7% of its stake in Vantage Towers to a consortium of investment firms KKR & Co., Global Infrastructure Partners (GIP) and The Public Investment Fund of Saudi Arabia (PIF) had a €16.2 billion enterprise value.
To find out more about what’s next for the European region, where the next M&A deals will be and to hear TAWAL speak in person, register to attend TowerXchange Meetup Europe on 16 and 17 May in London.