EuroTeleSites completed a historic three-year transformation on September 22 2023 when it achieved two milestones: it became the only European telecommunications provider to be spun off from its parent and then incorporated as a new tower company.
It listed on the Vienna Stock Exchange following the separation of A1 Telekom Austria Group’s radio tower business, which provides connectivity to around 31mn people across six countries in central and eastern Europe.
Ivo Ivanovski, chief executive of EuroTeleSites, says many other telecoms firms have spun off or sold their radio towers that were viewed as passive infrastructure. A1 Telekom Austria Group also looked into a sale but favoured a spin-off with shareholders receiving one share in EuroTeleSites for every four shares they owned in the parent company. Citi was lead financial adviser, with Erste Group Bank as co-financial adviser for the listing.
“As technology has improved we found that the towers were not being used in the optimum way, so spinning them off and creating a management team with dedicated key performance indicators would create additional value,” says Ivanovski. “Shareholders could get significant benefit from optimising capital expenditure and sharing this real estate with other telecoms firms.”
The spin-off began in the middle of 2020 and the primary objective was to be tax-neutral, which was a challenge because some countries had not carried out such a transaction before. Bulgaria was spun off in 2021, then Croatia and North Macedonia at the beginning of 2022, and Slovenia and Serbia at the end of 2022. Austria, the largest market, was spun off in 2023 and the listing completed the separation.
Healthy appetite
Before listing, EuroTeleSites also took out a €500mn loan and issued a €500mn bond to repay €1bn of debt from its parent. The five-year investment grade bond was issued in July 2023, at 5.25 per cent, via global co-ordinators Citi, Santander and UniCredit, who were joint bookrunners with BBVA, Erste Group and IMI-Intesa Sanpaolo.
There was strong appetite for the bond from infrastructure funds and demand reached €2.5bn, according to Ivanovski. He explains that América Móvil, the Mexican telecoms company that is EuroTeleSites’s majority shareholder, wanted to ensure that the new company was financially sound. América Móvil has also completed two spin-offs in Latin America which Ivanovski says was much appreciated in EuroTeleSites’s transaction.
“We were lucky that our majority shareholder has a lot of experience with bond issues but it was quite a ride to do the transaction during the spin-off,” says Ivanovski.
EuroTeleSites’s market capitalisation at the start of trading was €716mn, with Erste Group Bank and Raiffeisen Bank International as market makers in continuous trading. Ivanovski says the banking syndicate for the bond and the spin-off were chosen through a request for proposal process, which resulted in Citi acting on both transactions.
América Móvil owns 56.9 per cent of EuroTeleSites and ÖBAG, a holding company for Austrian state assets, owns 28.4 per cent. Both have a five-year lock up so Ivanovski does not see 85 per cent of ownership being diversified over that time period.
“América Móvil have upgraded operations and operate in similar countries, so they have faced the same challenges,” adds Ivanovski. “It’s very comfortable to have a shareholder who is very active and can share their knowledge.”
Ivanovski says that EuroTeleSites is the third-largest listed tower company in Europe and ahead of the competition with a very strong anchor tenant, A1 Telekom Austria Group, and strategic positioning in many countries.
“We can translate that into the best network infrastructure and our goal is to continue to invest in the towers and make them ready for new tenants,” he adds. “Other telcos have already shown interest so our primary goal is to continue to increase base revenue and third-party revenue.”
5G-ready
In its first reporting period as a public company, between September 22 and December 31 2023, EuroTeleSites reported revenues of €71.9mn, with the majority, 61 per cent, from Austria. The number of towers increased by 240 from the first half of 2023, taking the total to more than 13,400 sites.
Ivanovski says EuroTeleSites believes revenue growth will be close to 5 per cent in 2024. The company will continue to invest in the 5G upgrade and set up co-locations for third parties to steadily increase the tenancy ratio. He is optimistic that interest rates will fall, and decrease EuroTeleSites’s loan payments, and that telecoms firms will be able to invest more in their active equipment which will raise the valuation of tower companies.
“I’m very satisfied with all the work from our team because we started a new company without any hiccups and we were able to deliver our first results, which were a little bit ahead of what was forecast,” adds Ivanovski.
