Parent of Three UK Sells European Mobile Masts to Cellnex

As expected CK Hutchison Holdings, which is the parent of mobile network operator Three UK and some other providers, has today agreed to sell interests in European tower assets (including the UK, Austria, Denmark, Ireland, Italy and Sweden) and businesses to Spanish company Cellnex for £9bn (€10 billion).

The total consideration for the sale – reflecting the acquisition of c.24,600 sites (masts and rooftop sites) – is €10 billion, consisting of €1.4bn in new shares equating to approximately a 5% stake in Cellnex on an enlarged share capital basis and the balance in cash (€8.6bn). CKHGT’s partner in Denmark and Sweden is expected to receive 5% of the total consideration as and when it is received by CKHGT.

As part of this deal Cellnex and CK Hutchison will sign long-term service contracts for an initial period of 15 years, extendable for an additional 15 years. After completion Cellnex will have a total of c.103,000 towers and telecommunications sites.

Cellnex recently became a more familiar name in the UK after they gobbled Arqiva’s UK masts and rooftop sites for £2bn. One of the opponents of that deal was Three UK, which initially warned that it could make the company too dominant (here), not least because they would gain “control of over 80% of independent mobile sites in the UK” and there would thus no longer be much competition when negotiating future access to such sites (i.e. higher prices). The Competition and Markets Authority (CMA) ultimately found that the deal “does not raise competition concerns” (here).

Meanwhile a number of European operators have recently been looking at ways to help fund their expensive deployments of new 5G based mobile broadband technology, as well as needing to cut their debts. For example, Vodafone have already moved to monetise a substantial proportion of its European tower infrastructure (Vantage Towers).

Suffice to say that CK Hutchison has a similar idea and sees this deal as a way of “accelerating the rollout” of 5G networks, while also “realising significant capital gains and net cash proceeds, which will materially reduce CKHH’s net financial indebtedness and strengthen its financial profile.”

Mr Canning Fok, CKHH’s Group Co-managing Director, said:

“We are pleased to gain a long-term partner in Cellnex while unlocking value in our telecom assets for our shareholders. This will improve our operational efficiency and accelerate 5G rollout, put us in a very good position if the right opportunities arise, and provide us an opportunity to enhance our shareholders’ returns.”

The agreement is structured as six separate transactions – one for each country – with closing in each country whenever the relevant conditions for the transaction are met. The first transactions are expected to close by the end of December 2020, while others will occur in 2021. In addition, we’ve been told that the deal will have “no impact” on Three UK’s network sharing arrangement with EE (BT) via MBNL.

CKHGT will also enter into long-term service contracts with Cellnex in each relevant jurisdiction regarding the provision of passive telecommunications infrastructure services, as well as strategically partnering with Cellnex to roll out approximately 6,700 additional sites across the six countries (mostly to help boost 5G).