MADRID (Reuters) - Telefonica’s German division (TEF.MC) has signed a deal to sell thousands of phone masts for 1.5 billion euros, the latest move by a telecom operator to generate cash from its assets in preparation for investment in next-generation 5G internet.
Telefonica Deutschland will sell around 10,100 masts to Telxius Telecom, the infrastructure company the Spanish group owns with private equity firm KKR (KKR.N) and Zara owner Amancio Ortega’s investment fund Pontegadea, Telefonica said in a Spanish bourse filing on Monday.
Telxius will finance 90% of the operation from its own resources and through a capital hike that will be proportionately subscribed by its current shareholders according to their participation in the company, Telefonica said. The remaining 10% will be financed with debt.
As a consequence of the deal, Telefonica’s overall net debt would be trimmed by around 500 million euros between 2020 and 2021, it said.
The operation with Telxius, which is subject to regulatory approvals, would take place in two stages, being completed in August 2021. It also includes a commitment to build 2,400 additional masts in four years, granting Telxius a portfolio of over 32,000 masts in six countries.
Phone masts have long been popular among investors because they generate steady revenue.
The CEO of Telefonica’s German unit said last month he was seeing “extremely high demand” for Telefonica Deutschland’s towers, and valuations were high enough to justify sales.
Telefonica said last year that, outside of Telxius, it owned around 50,000 mast sites that could generate core earnings of around 360 million euros ($406.62 million).
As part of a new strategy to boost revenue announced last year, the company plans to create a separate unit to hold its infrastructure assets, the like of which have attracted much higher prices in recent years than investors are willing to fork out for operators’ shares.
Reporting by Isla Binnie and Joan Faus; Editing by Chris Reese and David Evans