Vodafone and O2 Agree Deal to Monetise UK Mobile Mast Sites

In an unsurprising development, mobile operators O2 (Telefonica) and Vodafone, which have a 50:50 network sharing agreement via Cornerstone (CTIL), have today moved to jointly commercialise their existing UK mast and tower sites as part of a new long-term Master Services Agreement (MSA).

The joint venture has been running since 2012 and manages the passive tower infrastructure for both operators. CTIL currently operates c.14,200 macro sites with a 2.0x tenancy ratio (including active sharing) and c.1,400 micro sites. The company also provides management services for the anchor tenants for a further c.5,100 third party sites where their active equipment is deployed.

The move to commercialise CTIL was widely expected as Vodafone have already monetised a substantial proportion of their European tower infrastructure via Vantage Towers. Today’s new agreement formalises that for the UK and will also see them transfer their 50% shareholding in Cornerstone to Vantage Towers.

The new agreement will thus give each company the opportunity to monetise their assets, with initial terms of 8 years, with three additional 8-year renewal periods. The idea is that this shouldn’t “materially impact existing network agreements” and CTIL will continue to primarily serve its shareholders (i.e. they’re the preferred supplier of new sites for both operators), as well as some third parties.

Mark Evans, CEO of Telefónica UK, said:

“This is an exciting announcement in our ongoing drive to provide world class connectivity to our customers. The new agreement will allow us to deliver value for our business while investing in our network infrastructure.”

Vivek Badrinath, Vantage Towers CEO, said:

“Cornerstone is a great addition to the Vantage Towers portfolio. Cornerstone is exactly the type of high quality grid we like to own: a number one market position, and two strong anchor tenants with network sharing agreements in place for whom we are the preferred supplier. We look forward to working with our anchor tenants to power the UK’s digital transformation, enabling the roll-out of 5G networks to benefit business and consumers and ensuring greater mobile coverage for all.”

The move could help to raise additional funding for the on-going rollout of gigabit-capable 5G based mobile broadband networks, which is expected to take several more years to complete. In keeping with that, both O2 and Vodafone UK have agreed to commit as anchor tenants on c.1,200 new macro sites to be constructed by Cornerstone and c.1,950 new passive tenancies on existing macro sites operated by Cornerstone (total capital expenditure of approximately £130m).

Last November also saw CK Hutchison Holdings, which is the parent of mobile network operator Three UK, agree to sell interests in its European tower assets (including the UK, Austria, Denmark, Ireland, Italy and Sweden) and businesses to Spanish company Cellnex for £9bn (here).