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Vodafone opts for Frankfurt tower IPO

Flotation plans were unveiled alongside the telco’s first-quarter results
July 24, 2020

Vodafone (VOD) plans to float its European towers business in early 2021, choosing Frankfurt as the IPO venue over London. ‘Vantage Towers’ has over 68,000 towers across nine markets and is the first or second-largest player in each of those locations. The group said that Vantage has “highly secure, predictable cash flows” supported by long-term, inflation-linked contracts with “highly-rated tenants” – anchored by Vodafone itself.

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Vodafone first announced its ambition to split out its tower infrastructure operations just over 12 months ago, explaining at the time that such a move would enable it to reduce group debt. Little wonder; on a net basis, borrowings sat at a huge €42.2bn (£38.5bn) at the end of March – up from €27bn a year earlier, in a reflection of Vodafone’s €18.4bn acquisition of Liberty Global’s assets in Germany, the Czech Republic, Hungary and Romania.

The telecoms giant aims to maintain a majority stake in Vantage Towers after its listing, and there’s the potential for its 50 per cent holding in CTIL – the UK’s largest tower infrastructure company – to be tied into the flotation. On a pro-forma basis, Vantage’s revenues for the 2020 financial year would have landed at €950m – with adjusted cash profits of $523m, on a margin of 55 per cent.

In the same breath, Vodafone revealed that it has signed a deal to join up its Greek tower assets of those with the in-country player Wind Hellas. Vodafone will make a €25m payment to Wind’s controlling shareholder once the two companies have merged. Subsequently, it intends to transfer its nearly two-thirds stake in the newly-combined entity into the Vantage Towers business.

The move to float Vantage in Germany may disappoint those hoping for a UK listing, though Germany constitutes an ever-increasing proportion of Vodafone’s revenues – particularly after the Liberty deal. Indeed, the group’s first-quarter results – which landed alongside its towers revelation – showed German service revenue growth of 25 per cent on a reported basis to €2.8bn. Overall, European services revenues edged up 6.6 per cent to €7.2bn. And while total organic service revenues dipped by 1.3 per cent – tempered by restrictions on travel and, thus, roaming charges during the pandemic – this was still better than Barclays’ estimated fall of 1.9 per cent.

The group has maintained its guidance for 2021 – anticipating adjusted cash profits to be flat or slightly down, with free-cash flow (before spectrum payments) of €5bn.