March 11, 2022
German operator Deutsche Telekom has reportedly started the process of selling its towers business for around €18 billion.
This news comes courtesy of an exclusive from Reuters, which has been chatting to its shadowy anonymous sources again. DT currently owns over 40,000 masts, which come in handy for things like elevating radios in order to increase their range. In fact, you could go so far as to say DT wouldn’t be able to operate without them.
So, on the surface, a desire to flog these essential bits of kit is somewhat counter-intuitive. Would a mechanic flog their spanners or a hairdresser their scissors? Of course not, because the fleeting cashflow gain would be more than negated by their subsequent inability to earn a living. If, however, our enterprising tradesperson found themselves heavily in debt, they may find themselves compelled to contemplate the previously unthinkable.
That’s the situation much of the telecoms industry finds itself in, especially in Europe. Flogging your towers to a company like Cellnex, only to then immediately lease those same towers back, is very much in vogue on the Continent these days. Companies like DT seem to view such a move as the best of both worlds, in that they get a nice big chunk of cash to pay off their crippling debts, but still have access to the tools essential to do their job.
But let’s not kid ourselves, sell-and-lease-back deals are generally only undertaken from a position of desperation. After all, if it’s such a great idea, why are they only doing it now? Just as operators increasingly relinquish control of their IT infrastructure to public cloud giants, so they seem happy to hand over control of their towers to a third party.
The DT move was teased late last year in German paper Handelsblatt also, coincidentally, by anonymous sources. It seems safe to assume the sources for both stories were controlled leaks from DT itself, launching a trial balloon to see how the market reacts. Its shares were up a little bit, which is probably enough encouragement to proceed.
Investors are a notoriously short-termist bunch, however, and often get excited at the prospect of a one-off financial windfall that may create a sufficient temporary share price spike to allow them to exit their positions with a tidy profit. Most of them are probably not concerned about the long-term implications of a company selling the family silver and, in that respect, they seem to be in full agreement with the DT board.
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