KKR-backed group leads bidding for US$20b Deutsche Telekom arm — sources

KKR-backed group leads bidding for US$20b Deutsche Telekom arm — sources
-A +A

(July 5): A consortium backed by KKR & Co is emerging as the front runner to buy a stake in Deutsche Telekom AG’s sprawling wireless tower portfolio, people with knowledge of the matter said.

KKR had made an offer in conjunction with Global Infrastructure Partners and Stonepeak, the people said. Their bid is seen as more attractive than a rival proposal from Brookfield Asset Management Inc and Spain’s Cellnex Telecom SA, the people said, asking not to be identified because the information is private. 

Deutsche Telekom plans to formally choose a winner as soon as this week, according to the people. The unit could be valued at around US$20 billion (about RM88.39 billion) in any deal, the people said. 

While negotiations are in an advanced stage, no final decisions had been made and the talks could still fall apart, the people said. Deutsche Telekom could still decide to retain the asset or other bidders could emerge, the people said.

Vodafone Group plc’s listed infrastructure arm Vantage Towers AG was also among suitors studying the business earlier, Bloomberg News has reported.  

Representatives of Deutsche Telekom, Brookfield, Cellnex, GIP and KKR declined to comment. Queries sent to Stonepeak weren’t immediately answered during a US holiday. 

A spokesperson for Vodafone said the company is exploring its own options to achieve the objectives set out for its tower business in May, referring to statements by Vodafone chief executive officer Nick Read on the carrier’s hunt for value-creating deals.

The sale of stake in Deutsche Telekom’s tower business could be one of the largest infrastructure deals in Europe this year, according to data compiled by Bloomberg. KKR, GIP and Stonepeak jointly made a binding offer for a controlling stake in the unit, Bloomberg News reported last month. 

For Cellnex, missing out on a deal for Deutsche Telekom’s towers unit may end up boosting its stock, which has fallen by about a quarter this year, according to analysts at Bernstein.

“Reports of competing bids from private equity and the lack of clear synergies — Cellnex is not present in Germany — have fuelled investor concern that Cellnex might end up overpaying for the asset,” wrote Stan Noel in a Tuesday (July 5) note to clients. “We believe this explains in large part the stock’s underperformance in recent months.”

Europe’s struggling phone carriers once saw ownership of these infrastructure assets as a vital part of their business models. Now, under pressure to raise cash and cut the bill for new network investments, they’ve begun to spin off their wireless masts into separate units or sell them outright.

Institutional investors are drawn to such assets because of their ability to generate steady, long-term returns. KKR raised US$17 billion for its latest global infrastructure fund earlier this year, while GIP is targeting US$25 billion for what would be the world’s biggest pool of capital dedicated to infrastructure investments.