TPG Telecom weighing up demerger of infrastructure assets

Aside from Telstra, TPG Telecom is considered to have the best fibre network in Australia. Picture: AAP

TPG Telecom could be looking at a full blown demerger of its infrastructure assets.

Already, the $11bn Australian listed telecoms provider has hired Bank of America to work towards a sale of its $1bn tower portfolio this year.

But there is talk in the market that the telecoms group is also quietly assessing a plan to embark on a wider deal, packaging its infrastructure assets together for a demerger, including its fibre network, leaving the operating company remaining.

It is a plan being suggested in the market that will no doubt face plenty of questions when TPG Telecom reports its full-year results on February 24.

It also may be just what the internet and phone service provider needs to provide some firepower for its share price, which has been lagging by about 30 per cent since its merger with Vodafone Hutchison Australia in 2020.

The thinking is that if the plan were to move forward, it would involve TPG Telecom assets worth billions of dollars.

Aside from Telstra, TPG Telecom is considered to have the best fibre network in Australia, and while others are outdated TPG’s is state of the art, given the construction on the network it has recently carried out.

The thinking is that TPG could remain a shareholder of any spun-off infrastructure unit.

It comes after TPG Telecom appointed former investment banker Grant Dempsey as its chief financial officer in November.

Mr Dempsey was one of the prolific deal makers at JPMorgan when he had roles including head of investment banking for Australia and New Zealand before his departure in 2017 to join ANZ.

TPG Telecom embarked on a major restructure in December, where it reduced its 11 business units to seven, with fixed and mobile networks, IT and digital functions all merged together.

One of the largest shareholders in TPG is founder David Teoh, who sold a $335m interest in the business in December taking his stake from about 17 per cent to close to 14 per cent.

Other telecoms groups have been separating out their fibre assets including Telstra, which has placed the assets in its new stand-alone unit called InfraCo, with the expectation that they will eventually be sold.

In September, Telstra sold a

49 per cent interest in its telecoms towers to The Future Fund and Morrison & Co in a transaction that valued the business at $5.9bn.

The unit was renamed Amplitel and sold for 28 times its earnings, the same multiple for the sale of towers by rival Optus to AustralianSuper.

Also forming part of Telstra’s InfraCo are its data centres, exchanges, mobile tower assets ducts and pipes.

It comes as telecoms infrastructure assets remain in strong demand from buyers.

AustralianSuper last year agreed to pay Singtel’s Optus $1.9bn to own 70 per cent of its telecoms towers, with the business now called Australian Tower Network.

The country’s largest superannuation fund is now vying for Axicom, the telecoms tower company owned by Macquarie Infrastructure and Real Assets.

Also competing for the business is Canadian pension fund OMERs with Brookfield, American Towers and Digital Bridge, advised by Goldman Sachs ahead of final bids due next month.

Barrenjoey Capital Partners is advising the Canada Pension Plan Investment Board on the sale of the Australian operations of tower owner BAI Communications.

The towers are used for the radio and television broadcasters the ABC and SBS, and are in key positions in cities and regions to be used for 5G.

While they would provide a steady stream of income, much of the price will come down to the view from buyers as to how easily the towers will be converted for digital use which could create growth.

New Zealand telecoms company Spark has also signalled a potential sale of a stake of its portfolio of 1500 towers.