Deutsche Telekom (DT) is selling a 51% stake in GD Towers, its German and Austrian tower portfolio, to a consortium consisting of Brookfield Infrastructure Partners and DigitalBridge Group.
DT said that the entire portfolio of towers, which consists of 40,600 sites, is valued at $17.5 billion and Brookfield and DigitalBridge will pay roughly $6.64 billion for their stake. DT expects to receive $10.7 billion in cash, including debt of $4.1 billion, from the deal.
The company said that the proceeds will help it reduce its debt levels and accelerate its ability to achieve a 50.1% ownership in T-Mobile US. The company currently owns 48.4% in T-Mobile.
About 33,000 of GD Towers portfolio are in Germany and the remaining towers are in Austria. The company has about 800 employees and reported revenues of about $1.1 biliion in 2021. The current leadership of GD Towers, including CEO Bruno Jacobfeuerborn and CFO Thomas Ried, will continue to oversee the company after closing, which is expected to occur by the end of 2022.
DT also said that the company will retain favorable master lease agreements for anchor tenants Telekom Deutschland and Magenta Austria.
DT’s decision to sell its majority ownership in GD Towers comes as no surprise. Back in November, DT CEO Timotheus Hoettges said during an investor event that the German telecom operator was open to a potential merger with another tower company. And in March, Reuters reported that Goldman Sachs was advising DT on a potential sale of those tower assets. At the time, potential suitors included American Tower, Spain’s Cellnex, Vodafone Group’s Vantage Towers and Orange’s Totem.
Earlier this month it was speculated that Cellnex was a front runner in the acquisition but Cellnex announced yesterday that it was out of the running.
In a research note, New Street Research, said that the deal is favorable to DT because the company has a “call option” in the contract that allows it to secure more than 50% ownership and take back control at a later date. New Street noted that this clause should ease concerns from tenants that may see some strategic disadvantage to this deal.
However, New Street also noted that the $17.5 billion value of GD Towers is slightly below what was anticipated. Indeed, Reuters reported that DT wanted in the range of $19 billion to $22 billion for its towers. Nevertheless, New Street said that the $17.5 billion value is in line with expectations.
Buyers Brookfield and DigitalBridge are no strangers to the tower business. Brookfield manages about 200,000 telecom tower and rooftop sites globally and DigitalBridge manages a $47 billion portfolio of digital infrastructure companies, including tower firms like Vertical Bridge and Vantage Towers.