TPG follows Telstra, Optus by selling towers for $950m to Canada’s OMERS

The telco has joined rivals Telstra and Optus in monetising its passive infrastructure.

TPG has sold its mobile towers and rooftop infrastructure to Canadian pension fund OMERS in a deal worth $950m, which will be used to repay debt.

TPG has sold its mobile towers and rooftop infrastructure to Canadian pension fund OMERS in a deal worth $950m, a move CEO Iñaki Berroeta says will help the telco repay its bank debts.

TPG is the last of Australia’s ‘big three’ telcos to off-load its towers arm, following a deal from Optus to sell 70 per cent of its towers business in October and after Telstra last year netted $2.8bn for a sale of 49 per cent in its telecommunications tower portfolio to Morrison & Co and the Future Fund.

Mr Berroeta said on Monday the sale would build on TPG’s network sharing agreement with Telstra announced in February, which is still subject to approval from the competition regulator.

TPG expects an accounting gain on the sale of between $350-$400m after tax, he said.

“We are delighted to have concluded the strategic review of these assets with such a strong outcome for TPG Telecom shareholders,” Mr Berroeta said.

“The transaction represents competitive long-term financing, which will reduce our total financial leverage and deliver lower borrowing costs.

TPG chief executive Inaki Berroeta. Picture: iStock

“The tower sale demonstrates the disciplined approach we are taking to asset utilisation and capital allocation as we pursue opportunities to unlock value and maximise our potential for customers and shareholders.”

TPG operates around 5,8000 rooftop sites and towers in Australia but only owns the passive infrastructure on around 1230 of them. The company will still be able to access the 1230 towers in its network for its mobile services as part of a 20-year leasing agreement, which includes an option to extend.

The deal is still subject to regulatory approvals from the Foreign Investment Review Board.

“Australia and Asia-Pacific more broadly are priority markets for OMERS Infrastructure, where we continue to see significant investment opportunities,” OMERS senior manager for Asia Pacific Christopher Curtain said.

“We are excited to have the investment in TPG’s Tower Assets join our portfolio of high-quality Australian infrastructure investments, alongside Port of Melbourne, Transgrid and renewable energy developer FRV Australia. In the transaction, we see an excellent opportunity to realise our digital infrastructure thesis in the region.

“We look forward to working with the TPG team to first transition the business and then support its growth as it provides critical telecommunications infrastructure services to its customers.”

Shares in TPG last traded at $5.57, giving the company a valuation of $10.36bn.

UBS analyst Tom Beadle said the result was a good outcome for TPG. TPG is the firm‘s top pick in the telecommunications sector, and giving its shares a ’buy’ rating at a $7.10 price target.

“We see scope for TPG to potentially increase its dividend payout ratio with with improvement in its gearing, and we also highlight our view that earnings before interest, taxation, depreciation and amortisation (EBITDA) can grow significantly on a three year-plus view.

“Key drivers include the reversal of Covid headwinds, a more rational mobile competitive environment, growth in on-net fixed wireless and cost synergies.”

TPG’s deal with Telstra will give it access to around 3700 extra network towers, and Mr Berroeta said in a speech last week that the partnership “resets the competitive environment for mobile services in Australia.”

Optus has called on the ACCC to block the move, calling it anti-competitive.

“There has been a very small number of industry voices who don’t share our optimism or enthusiasm for the future benefits that network sharing will bring to Australian mobile. And while this is disappointing, it is not unexpected,” Mr Berroeta said at a speech to the CommsDay Summit in Sydney, first reported by The Australian.

“To suggest the entry of TPG Telecom’s family of brands, our wholesale customers and our MVNO partners into new regional markets, is somehow going to ‘distort markets and hurt competition’, is inaccurate and inappropriate.”