VODAFONE today unveiled plans to spin off or float its telecom tower business, a company that would be valued at up to £18 billion and rocket into the FTSE 100.
The latest move by chief executive Nick Read will see Europe’s largest portfolio of phone towers — 61,700 in 10 markets — wrapped together into a separate business by next May.
Voda will keep a majority stake in TowerCo but is open-minded about whether to sell the business — infrastructure funds are likely to be interested — or go for a float.
With profits of around €900 million (£800 million), TowerCo would be worth about as much as engineering giants Rolls-Royce and BAE Systems. It would likely be a reliable source of dividend payments to pension funds.
The City was enthusiastic, pushing Vodafone shares up 7.5% to 143p.
Read has been chief executive for less than a year but already completed a deal to buy Liberty Global’s German and eastern European cable firms and taken the difficult decision to slash Voda’s divi.
He said of TowerCo: “Given the scale and quality of our infrastructure, we believe there is a substantial opportunity to unlock value for shareholders while capturing the significant industrial benefits of network sharing for the digital society.”
The deal would allow Vodafone to focus on selling broadband and developing 5G services. TowerCo would allow rival telecom companies to share infrastructure, a move that will please City planners and environmentalists worried about the growth of the masts.
The cost savings industry-wide should allow more investment in 5G, the next generation mobile phone network.
Vodafone says it would use the proceeds from the sale or float of TowerCo to pay down its debt pile, an eye-watering €47 billion. It also reported first-quarter results today, showing total revenue slipping 2.3% to €10.6 billion.
Read, who succeeded Vittorio Colao as Vodafone boss in October, said: “Following a significant quarter of commercial activity, we expect the gradual recovery in our service revenues to continue.”
Analysts at JPMorgan were upbeat on the TowerCo plan. The bank said in a note: “The scenario analysis within this report shows that this deal, twinned with the recently approved Liberty Global deal, could unlock significant value and see the shares re-rate as much as 50%-60%.”
