Digital Colony in Optus race

Do not rule out Digital Colony in the upcoming auction for Singtel’s $2bn Optus mobile towers business, say sources.

One party that should not be discounted in the upcoming auction for Singtel’s $2bn Optus mobile towers business is Digital Colony, say sources.

The company is based in Florida and has previously invested in Europe and South America.

The understanding is that it is a likely contender in the sales process, anticipated to get under way around February.

Singtel made a decision to sell its Optus towers in Australia earlier this year and has hired Bank of America to run the auction.

A number of prospective buyers are already getting ready.

However, Telstra’s recent announcement that it is likely to explore a sale of its mobile phone towers — potentially by the end of next year — may have created a challenge for the Optus.

Prospective bidders are unlikely to gain regulatory approval to own both portfolios, which may prompt some to hold off until the Telstra assets hit the market.

While Digital Colony is yet to enter the Australian market, it is believed to be keen to make more acquisitions after growing from $4bn under management to $20bn.

Private equity firm EQT has partnered with the group before through its infrastructure arm, so the pair may opt to vie for assets together.

Even so, EQT Infrastructure has made large investments in the telecommunications fibre space and is also expected to be a contender.

With respect to the Optus process, many believe superannuation funds will be best placed to buy the assets, due to their financial firepower.

But operators may be given preference by Optus.

The company needs proceeds from a sale to fund the rollout of 5G infrastructure, but would also benefit from the expertise of another major player in the space.

Superannuation fund investors such as IFM, Aware Super, First Sentier and QIC are all expected to be in the mix when the auction gathers momentum.

Australia-based telecommunication tower company Stilmark is believed to be interested. It is backed by former Telstra boss David Thodey, Stockland chief Mark Steinert, former BCA chair Graham Bradley, the Liberman family and former Vodafone Hutchison Australia boss Nigel Dews.

The company counts Canadian pension fund Omers as its major supporter.

Others that will line up are the former Crown Castle business Axicom, which is working with Credit Suisse and Macquarie Capital, along with Morrison & Co and the Future Fund, which is being advised by UBS.

American Tower — one of largest global players — is expected to compete, as is Spanish telecommunications infrastructure owner Cellnex Telecom, while Edotco Group in Asia could be in the mix.

Expectations are that a 70 per cent interest in the business will be on offer, with Optus to retain the remainder and a potential development opportunity to build more towers.

The logic is that by Singtel’s Optus holding a stake, it will align the interests of the customer and the owner of the infrastructure.

Axicom, the former Crown Castle operation, remains the favourite by some to win the competition, providing the Australian Competition & Consumer Commission has no objections, but may need to discount its existing services to Optus to win the seller over.

Crown Castle was purchased in 2015 for $2bn by a consortium led by Macquarie Infrastructure and Real Assets.

The buyer of the Optus towers will see long-term agreements in place covering what they are signing up to and there will be plenty of transparency around pricing.