Vodafone's Vantage Towers Earmarks $1.19 Billion for M&A, Investment -- Update

--Vodafone's separated European tower unit says it has the capacity to explore opportunities

--Vantage presented financial results for the first time

--Vodafone expects an IPO of the business in Frankfurt next year

By Adria Calatayud

Vodafone Group PLC's European telecommunications tower unit Vantage Towers said Tuesday that it has capacity to spend 1 billion euros ($1.19 billion) in acquisitions and organic investments.

Dusseldorf-headquartered Vantage--which has been operating separately from the U.K. telecommunications group since May--presented financial results for the first time ahead of its planned initial public offering in Frankfurt next year. The company didn't provide details on its listing, but Vodafone on Monday said the IPO of the business was on track for early 2021.

"We will consider merger and acquisition opportunities if they enhance shareholder value," Chief Executive Vivek Badrinath said in a call with reporters.

With around 68,000 tower sites in nine countries, Vantage is seeking to tap into investors' increasing appetite for telecommunications-infrastructure assets on hopes that the industry will benefit from surging data usage, the rollout of 5G networks, and regulatory coverage obligations across Europe.

Vodafone said in July 2019 that it would separate its European tower-infrastructure operations, in a bid to extract value from its assets to cut its debt pile.

Mr. Badrinath said the telecom-infrastructure sector has significant room for growth in Europe, as tower outsourcing is lower than what it was in the U.S. two decades ago.

In addition to M&A, Vantage expects to drive growth by attracting new tenants to existing sites and by expanding its footprint, Mr. Badrinath said.

Vantage said its pro forma adjusted earnings before interest, taxes, depreciation and amortization after leases for the first half of fiscal 2021 were EUR267 million, in line with management's expectations. Revenue for the six months to Sept. 30 was EUR479 million.

For the year ended March 31, the company's pro forma adjusted Ebitda after leases was EUR680 million, including its share of Infrastrutture Wireless Italiane SpA's earnings for 2019, as Vantage owns a 33.2% stake in the Italian telecom-infrastructure company.

Commitments for 7,100 new sites are expected to generate a contribution to adjusted Ebitda after leases of EUR130 million by fiscal 2027, Vantage said.

The company said Vodafone intends to transfer its 50% co-controlling shareholding in its U.K. infrastructure joint venture Cornerstone Telecommunications Infrastructure Ltd.--which owns 14,300 towers in the U.K.--subject to reaching an agreement with partner Telefonica SA's U.K. arm, O2. This would add between EUR50 million and EUR70 million to Vantage's adjusted Ebitda.

"Discussions are progressing well, but they aren't finalized," Mr. Badrinath said.

Germany is Vantage's largest market, as it makes more than 40% of its profit there. Around two-thirds of the company's tower sites are in urban or suburban areas, while the remaining third are ground-based towers in rural locations.

Write to Adria Calatayud at [e-mail]

(END) Dow Jones Newswires

November 17, 2020 08:45 ET (13:45 GMT)

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