Some like their eggs sunny side up. Nick Read, the boss of Vodafone, naturally sees the brighter side of his slow restructuring of the UK telecoms group. Wednesday’s deal on Vantage Towers is no exception.
Minority shareholders in the cellular towers business will do well from the transaction, which is worth €20.3bn with debt. Hard-boiled Vodafone investors should ask how much the transaction helps them.
They might reasonably have hoped Vodafone would sell its entire 82 per cent stake in Frankfurt-listed Vantage Towers. Instead, Vodafone is setting up a joint venture to own the subsidiary in partnership with a consortium whose members include KKR, the Saudi Public Investment Fund and Global Infrastructure Partners. The JV would then buy out minorities in Vantage.
Vodafone’s exposure to Vantage might therefore theoretically drop by 32 per cent, not 82 per cent.
As Read points out, Vodafone would get no less than €3.2bn in cash and up to €5.8bn, watering down a net debt pile estimated at €41.4bn for this year. In a best-case scenario, where the consortium exercises an option to increase its stake to 50 per cent by June 2023, Vodafone could get a total of €7.1bn.
The deal de-consolidates Vantage’s debt from Vodafone’s balance sheet, removing another €4.1bn.
The cash consideration from the consortium depends partly on how many minorities sell out. The takeout price should tempt the latter. It puts Vantage’s valuation at 26 times trailing ebitda. Spanish peer Cellnex trades on 18 times, as does US-listed American Tower.
Meanwhile, Vodafone’s simplification is proceeding slowly. The group recently exited the small markets of Ghana and Hungary.
Deal rumours have been circulating for a month. Vodafone’s share price has barely moved. The transaction has done little to move the dial.
The analogy is the breakfast egg of an over-polite English curate. The difference is that the deal genuinely is “good in parts”. Read has gone halfway to shedding the Vantage stake in a tough market. A partial disposal is better than no disposal at all.
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