Telefónica seeks to boost funds from tower assets

Telefónica estimates its tower sites could generate about $915 million in revenue. (Getty Images)

Mobile operator Telefónica on Tuesday announced it would speed up plans to monetize its tower infrastructure assets, giving itself a 12-month timeline to generate funds.

The Spanish operator disclosed it’s exploring different options to capitalize on its tower portfolio, following a board meeting where the company also decided to make major workforce changes to help improve its financial position. This includes a voluntary retirement plan for workers over 53 years old, and the retraining of more than 6,000 employees.

In terms of its tower plan, Telefónica’s infrastructure subsidiary Telxius, created in 2016, owns about 18,000 sites. An additional 50,000 sites are owned by other Telefónica units, more than 60% of which are in Spain, UK, Germany, and Brazil – the four main countries Telefónica operates in.

RELATED: Vodafone spins off its European tower business into a separate company

The Spanish operator estimates that these sites, excluding those held by Telxius, could generate about €830 million ($915.3 million) in revenue, depending on lease rates.

Telefónica said its still analyzing various ways to monetize the towers, including potentially expanding Telxius by incorporating additional sites. Since inception, Telxius has grown its third-party tenant base by more than 40%, and in 2018 the unit generated €792 million ($871.3 million) in revenues.

The aim of the infrastructure strategy is to maximize shareholder value, improve rerun on capital and create more efficient use of the company’s tower assets, according to Telefónica.

Separately, it plans to explore infrastructure sharing arrangements with other local operators, like those it has struck in major markets such as the U.K.

Of Telefónica’s towers, it owns 9,000 sites in the U.K. through a 50-50 joint venture called Cornerstone that was created with Vodafone in 2012. Cornerstone supports the pair’s active sharing agreements, and in late July Telefónica’s O2 announced an extension of the existing deal with Vodafone to help speed up and reduce the cost of rolling out 5G. The arrangement includes sharing 5G equipment, such as radios, on joint sites across the U.K.

RELATED: O2 to turn on 5G service in 6 U.K. cities this October

Telefónica and Vodafone also agreed to explore potential options for monetizing the Cornerstone assets.  

Vodafone itself has been evaluating ways to cash-in on its European tower portfolio since November 2018, and in late July announced it would spin its passive tower assets into a separate entity named TowerCo.

Vodafone said TowerCo would be operational by May 2020 and have its own dedicated team to manage 61,700 towers in 10 markets. It estimates that the tower company could generate annual revenue of around $1.9 billion.

The operator said that depending on market conditions, it may ultimately price TowerCo for an IPO within 18 months.