Deutsche Telekom sells majority of its tower portfolio in Germany and Austria for EUR 17.5 billion; eyes majority stake in T-Mobile US

Deutsche Telekom sells majority of its tower portfolio in Germany and Austria for EUR 17.5 billion; eyes majority stake in T-Mobile US

• Sale of 51 percent stake in GD Towers at 17.5 billion euros enterprise value
• DigitalBridge and Brookfield to bring both towers expertise and capital to evolve and accelerate GD Towers strategic plans for enhanced value creation
• Deutsche Telekom to retain 49 percent stake in GD Towers with significant minority protection rights, maintaining sizeable exposure to future value upside in this attractive telecom infrastructure asset class
• Favorable Master Lease Agreement (MLA) and joint governance set-up enables to continue mobile network leadership of anchor tenants Telekom Deutschland and Magenta Austria
• Estimated cash proceeds of 10.7 billion euros to be used for deleveraging at Deutsche Telekom Group level and acceleration of path towards 50.1 percent targeted stake in T-Mobile US
• Transaction expected to close towards end of 2022

(PRESS RELEASE) BONN, 14-Jul-2022 — /EuropaWire/ — Deutsche Telekom (ETR: DTE), one of the world’s leading integrated telecommunications companies and the largest telecommunications provider in Europe by revenue, has announced the divestment of the majority (51 percent) of its telecom tower portfolio (GD Towers) in Germany and Austria for EUR 17.5 billion enterprise value while eyeing a possible majority stake interest in T-Mobile US. The buyers, Digital Bridge (NYSE: DBRG), a global digital infrastructure investment firm, and Brookfield (NYSE: BAM), one of the world’s largest alternative investment management companies, have substantial exposure to the European towers sector. The deal represents an attractive EV/ pro forma adjusted EBITDA AL 2021A multiple of around 27 and marks the successful conclusion of Deutsche Telekom’s strategic review of its towers business as announced at the May 2021 Capital Markets Day.

“Deutsche Telekom once again delivers on its strategic agenda. We crystalize the value of our tower assets, thereby creating value for our shareholders,” said Tim Höttges, CEO of Deutsche Telekom. “At the same time the deal allows us to continue improving Deutsche Telekom’s undisputed network leadership in Germany and benefit from further value upside of the towers business through our retained 49 percent stake.”

“The partnership being formed today is about building the next generation digital infrastructure champion of Europe,” said Marc Ganzi, CEO of DigitalBridge. “The combination of Deutsche Telekom’s leading mobile network and market position, alongside one of the largest real asset managers in the world in Brookfield, combined with the digital infrastructure domain expertise of DigitalBridge, creates a team of unmatched capabilities to support GD Towers as it grows to meet the evolving network demands of enterprises and consumers across Europe.”

“We’re delighted to be partnering with Deutsche Telekom and DigitalBridge to expand our presence in the European telecom infrastructure sector,” said Sam Pollock, Managing Partner at Brookfield and CEO Infrastructure. “This represents a great opportunity to invest in a highly attractive tower portfolio, with highly contracted cash flows and strong upside potential. Brookfield is already a leading global infrastructure investor, with approximately 200,000 telecom tower and rooftop sites under management globally. We hope to bring that experience and expertise to this new partnership, for the benefit of our customers in Germany, Austria and beyond.”

With around 800 employees, GD Towers operates more than 40,000 sites in Germany and Austria and has a successful track record in delivering new sites for its anchor tenant Telekom Deutschland and securing revenues with third party customers. The Company generated 1.1 billion euros of pro forma revenues in 2021. Pro forma adjusted EBITDA AL 2021 amounted to 640 million euros.

Both Digital Bridge and Brookfield have substantial exposure to the European towers sector. In joining forces with Deutsche Telekom, the partners will provide both expertise and long-dated capital to further refine and evolve the GD Towers strategic plans and ambitions for enhanced value creation in both the core towers business and in fast-growing adjacent segments as well as through M&A. The transaction structure enables GD Towers to pursue these value-accretive investments with a capital structure appropriate for an infrastructure business, which otherwise would be subject to the constraints of the Deutsche Telekom balance sheet.

The current GD Towers leadership team with Bruno Jacobfeuerborn (CEO) and Thomas Ried (CFO) will continue running the business after closing. Deutsche Telekom retains a 49 percent stake and significant minority protection rights including the right to appoint two out of five members of the Shareholder Committee, including the initial chairman. Furthermore, Deutsche Telekom also has the right to regain control and reconsolidate GD Towers in the future.

Telekom Deutschland and Magenta Austria will continue to enjoy unconstrained access to the passive mobile infrastructure of GD Towers via favorable long-term (around 30 years) lease agreements. Amongst other these agreements afford the network operators inflation protection with annual site lease increases indexed to the respective consumer price indices at a discount of 15 percent but capped at 3 percent, guaranteed access to strategically critical ”golden sites”, preferential access to free site capacity for future network upgrades, industry-leading operational service levels and buyback rights. Both Telekom Deutschland and Magenta Austria have secured reciprocal contractual commitments from GD Towers for around 5,400 new sites through 2026 and prioritized capacity for radio access network modernization through 2028.

The transaction will reduce Deutsche Telekom’s financial leverage by 10.7 billion euros (c. 0.2x EBITDA AL) and net debt including leases by 6.5 billion euros (c. 0.1x EBITDA). The incremental headroom will mainly be used for deleveraging at the Deutsche Telekom Group level and to accelerate the path towards its targeted 50.1 percent share capital interest in T-Mobile US.

The transaction is subject to usual regulatory approvals. Closing is expected towards end of 2022.

This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. They are generally identified by the words “expect,” “anticipate,” “believe,” “intend,” “estimate,” “aim,” “goal,” “plan,” “will,” “seek,” “outlook,” or similar expressions and include generally any information that relates to expectations or targets for revenue, adjusted EBITDA AL, or other performance measures. Forward-looking statements are based on current plans, estimates, and projections, and should therefore be considered with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom’s control. They include, for instance, the progress of Deutsche Telekom’s staff-related restructuring measures and the impact of other significant strategic or business initiatives, including acquisitions, dispositions, and business combinations. In addition, movements in exchange rates and interest rates, regulatory rulings, stronger than expected competition, technological change, litigation and regulatory developments, among other factors, may have a material adverse effect on costs and revenue development. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, Deutsche Telekom’s actual results may be materially different from those expressed or implied by such statements. Deutsche Telekom can offer no assurance that its expectations or targets will be achieved. Without prejudice to existing obligations under capital market law, Deutsche Telekom does not assume any obligation to update forward-looking statements to account for new information or future events or anything else. In addition to figures prepared in accordance with IFRS, Deutsche Telekom presents alternative performance measures, e.g., EBITDA, EBITDA AL, adjusted EBITDA, adjusted EBITDA AL, adjusted EBITDA margin AL, Core EBITDA, adjusted EBIT, EBIT margin, adjusted net profit/loss, adjusted earnings per share, free cash flow, free cash flow AL, gross debt, and net debt. These measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Alternative performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways.

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SOURCE: Deutsche Telekom AG