The Telstra Corp Ltd (ASX: TLS) share price has dipped as the end of the week nears. However, the story of the day is the sale of its biggest competitor's tower network.
In news sure to perk up the ears of telecommunications investors, Optus has sold a 70% interest in its Australian mobile tower network. Interestingly, this is happening a few months after Telstra carried out its own 49% sale of its InfraCo Towers.
Which begs the question, how do the deals stack up against each other?
How does the Optus sale compare to its ASX-listed competitor Telstra?
Yesterday, news broke that Singapore Telecommunications owned Optus had proposed to sell 70% of its shares in Australia Tower Network (ATN). According to the release, the sale of its network consisting of 2,312 towers is to AS Infra, which is owned by Australian Super.
Furthermore, the deal is valued at A$1.9 billion, comprising three payments. Where it gets interesting is the valuation of Optus' network in comparison to the sale of the towers previously owned by ASX-listed Telstra.
Telstra managed to garner a payout that reflected 28 times the earnings before interest, tax, depreciation, and amortisation (EBITDA). This was for a 49% interest in the company's InfraCo Towers which came to a total of $5.9 billion. A consortium of investors including Future Fund, Commonwealth Superannuation, and Sunsuper agreed to cough up the cash.
Meanwhile, 3 months later and Optus has pulled a sale price that represents a much higher EBITDA multiple of 38 times. This is interesting considering the Telstra sale involved around 8,200 towers. That would give it the title of the largest mobile tower infrastructure provider in Australia.
Setting records
In fact, it is understood the earnings multiple for Optus' assets is a global record for a tower sale, beating out Telstra on the ASX.
Commenting on this, Optus chief executive Kelly Bayer Rosmarin stated:
We obviously think that what we achieved in terms of valuation reflects the strong quality of our assets and relatively high tenancy ratio that we have with room to grow.
The sale of these assets positions Optus well for the future as it provides capital to support core business growth while importantly allowing us to maintain the competitive advantage of our network's active elements which continue to top independent reports on speed and quality of our network.
While Telstra investors might feel disappointed by its cheaper sale multiple for its tower assets, there is more worth considering.
Potentially, bidders were willing to pay a higher premium for ATN considering it was for a controlling stake. That means Australian Super will now call the shots when it comes to decision-making for the network. Whereas, Telstra sold a minority interest of 49%.
What's next for Optus?
Following the sale, Optus will lease back the use of the towers from Australian Super. This strategy unlocks a large amount of capital for the Telstra competitor to expand upon its 5G ambitions.
Finally, the transaction is expected to be completed in October. In contrast, ASX-listed Telstra was expected to complete its transaction before the end of September. However, there has not been an announcement to confirm this yet.
