Three UK Parent Close to £9bn Sale of Mobile Masts to Cellnex

The parent of mobile operator Three UK, CK Hutchison Holdings, has officially announced that they’re in an “advanced stage of negotiations” to potentially sell their mast and rooftop infrastructure across Europe to Cellnex in a transaction that could be worth c.£9bn (10bn Euros); it might also boost their 5G rollout.

Spanish company 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).

Fast forward to today and 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 Three UK is now considering a similar solution, albeit via Cellnex.

The proposed agreement will also include support for an “accelerated 5G network rollout through a committed built-to-suit expansion program,” which doesn’t really tell us much. Three UK will no doubt want to retain as much preferential access and support as possible to their current infrastructure.

CK Hutchison Holdings Statement

The Company announces that the Group is in an advanced stage of negotiations with Cellnex Telecom S.A. (“Cellnex”) and has reached substantial agreement on the key commercial terms for the disposals of the Group’s interests in its telecommunications infrastructure assets in Europe held indirectly by CK Hutchison Group Telecom Holdings Limited, an indirect wholly-owned subsidiary of the Company, to Cellnex.

Upon completion, Cellnex and the relevant Group companies will enter into service agreements for Cellnex to provide to the Group telecommunications infrastructure services and to support an accelerated 5G network rollout through a committed built-to-suit expansion program (together the “Transactions”). Agreements in relation to the Transactions remain subject to finalisation of definitive documentation.

Total proceeds on completion of the Transactions are approximately EUR10.0 billion, including minority partners’ share. However, no decision has been taken to proceed with any transaction and there can be no certainty that any transaction will proceed or, if it does, what the scope or terms of such transaction would be.

The Company will make a further announcement pursuant to any applicable requirements prescribed by the Listing Rules and/or Part XIVA of the SFO as and when appropriate.

At this point some might wonder what sort of impact this could have on Three UK’s network sharing arrangement with EE (BT) under the umbrella of Mobile Broadband Network Limited (MBNL), although Vodafone have already shown that such agreements are not an obstacle. Suffice to say, we don’t expect MBNL to be too much of a problem.

Whether or not such a deal will actually be able to “accelerate” their 5G deployment, or if that’s just a bit of spin, is another matter. In the UK Three has been hit hard by the Government’s decision to ban Huawei and so anything that can help to get their 5G rollout back on track is probably a good thing.