Singtel has brokered a deal to sell off its towers in Australia and unveiled a strategy to build new data centres outside Singapore.
First up, the towers. Singtel’s Optus unit has been working on the sale of its telecoms towers for the past few months and has now inked an agreement to sell 70% of Australia Tower Network (ATN) to superannuation fund AustralianSuper. The deal values ATN at around A$2.3 billion, giving Singtel net proceeds of A$1.9 billion (US$1.4 billion) that it can plough into 5G, amongst other things.
As we have come to expect with towers deals, that price tag represents a hefty earnings multiple. Singrtel puts it at 38x pro forma EBITDA for full-year 2021, falling to 28x on completion of its build-to-suit programme.
“This is significantly above telco multiples, reflecting the high quality of the assets and tenants,” Singtel said. That’s a fair point, but to be even fairer, it’s worth pointing out that Optus’ major rival Telstra also garnered a valuation of 28x EBITDAaL when it offloaded 49% of its towers business to a group of investors three months ago.
On completion of the transaction, which Singtel expects to take place later this month, subject to the fulfilment of various closing conditions, the telco will retain a 30% stake in ATN, which it says will give it “options for growth given the potential to increase the number of tenants on the existing towers.” It’s a model that it becoming increasingly common in telecoms; telcos are keen to monetise their passive infrastructure assets, given how high valuations are at present, but also want to keep a finger in the pie to secure a slice of the future growth potential and reliable returns that are attracting investors to the market.
Optus has, of course, agreed a leaseback deal with ATN, as well as committing to being the anchor tenant on the 565 sites yet to be built under the build-to-suit scheme. Those towers, which will form an integral part of its 5G network, the telco noted, are due to be constructed over the next three years.
Those towers will support Optus’ 5G rollout, as will the money the sale of the assets brings in, but only to an extent. Singtel said the funds would go into 5G and “other growth initiatives” including the expansion of its B2B digital services in Singapore and Australia through its NCS business, and fund dividends.
“The value of the transaction, the calibre of our partner and the access arrangements under the terms of the agreement will protect Optus’ strategic advantage and preserve its network leadership as it accelerates its 5G rollout across Australia,” said Singtel’s group CEO Yuen Kuan Moon, without disclosing what share of the spoils will go to Optus. “This transaction also supports our larger infrastructure strategy to unlock value through an asset-right approach which will free up capital to reallocate and reinvest in key growth areas,” he added.
One such growth area is the data centre space, and Singtel is keen to set itself up as a major player at a regional level.
The telco has signed an MoU with Thai power company Gulf Energy to build data centres across Thailand, and is holding talks with Indonesia’s Telkom to look at setting up more data centres in Indonesia and further afield. Singtel points out that Singapore, Thailand and Indonesia jointly make up more than 70% of the data centre market in the ASEAN region.
“We see data centres as a new growth catalyst for our Group and are very excited about kicking off our regional data centre business with partners like Gulf who recognise the strong growth potential of digital infrastructure,” Yuen said. “With the blistering pace of digital growth, we are seeing strong demand for an integrated network of data centres across different markets to deliver consistent standards and value-added services to customers as they scale their presence regionally. Our established track record, customer relationships and deep links with local partners in other markets, position us well to capture this new growth.”
Singtel describes its data centres push as a first step in the establishment of a regional digital infrastructure platform that will essentially bring in a revenue stream as well as supporting the telco’s own business needs.
“Singtel seeks to grow this business in partnership with long-term capital providers with complementary capabilities and networks, through further investments in next-generation infrastructure regionally,” it said.
It didn’t give anything away about the size of investment we might be looking at here, but doubtless offloading towers in Australia will help.
Source: https://telecoms.com/511621/singtel-sheds-towers-adds-data-centres/