Future Fund exits Optus towers race after Telstra deal

Telstra has sold off a 49 per cent stake in its telecommunications tower business.

The Future Fund and Morrison & Co have dropped out of the competition to buy a stake in the $2 billion Australian telecommunications tower portfolio owned by Singtel’s Optus following their $2.8bn investment in towers owned by Telstra.

Optus, with assistance from adviser Bank of America, is yet to shortlist bidders for its competition to buy 70 per cent of its Australian telecommunication tower assets after receiving indicative offers by June 17.

However, the shortlist from about 10 parties is expected to be released to bidders by Sunday.

In the running are the Macquarie Infrastructure and Real Assets-owned telco Axicom, advised by Credit Suisse and Macquarie Capital, Digital Colony, advised by Goldman Sachs, and the Blackstone-backed Phoenix Tower International.

Australian telecoms tower company Stilmark is also competing with Canadian pension fund backer Omers and ATN International, advised by RBC and Q Advisors, while Brookfield was earlier believed to be around the hoop.

KKR, together with Queensland Investment Corp and Canada’s Ontario Teachers’ Pension Plan, is competing and they are believed to be taking advice from investment bank Citi and advisory firm Gresham.

Telstra was expected to launch its sales process for a 49 per cent stake in its telecommunications tower entity InfraCo following the Optus process and the thinking had been that there were parties keeping their powder dry for that competition.

However, Telstra announced on Wednesday that a consortium led by Morrison & Co and The Future Fund has agreed to buy a 49 per cent interest in Telstra’s telecommunications tower entity InfraCo for a price that values the business at $5.9 billion.

The network of towers is the largest in Australia and the consortium that purchased the assets includes the Future Fund as its largest investor, Sunsuper and the Commonwealth Superannuation Corporation (CSC).

It is managed by Morrison & Co.

InfraCo owns and operates about 8200 tower assets including over 5500 mobile towers supporting critical digital infrastructure throughout Australia.

The transaction is expected to complete in the third quarter of 2021.

Telstra has entered into long-term service agreements with InfraCo to secure continued access to services.

Macquarie advised Telstra, while the winning consortium is believed to have sourced $800m to fund the transaction from Commonwealth Bank, NAB and Barclays.

The Future Fund is Australia’s sovereign wealth fund with $179 billion of assets under management and has been taking advice on tower acquisitions from Barrenjoey Capital Partners.

It comes at a time that infrastructure funds are flush with cash and eager to deploy funds amid a low interest rate environment.