BC Partners might not have been able to achieve quite as high a multiple for the sale of the towers business of its southeast Europe telecoms company United Group as it would have a year ago, Nikos Stathopoulos, BC’s chairman of Europe, told PE Hub Europe. But the 20.1x multiple – and the number of potential buyers that came calling – was still “very attractive”, and suggests there is still strong demand for such assets.
United’s sale of TowerCo, which runs towers in Bulgaria, Croatia and Slovenia, to Tawal, was in keeping with the approach taken by several other telecoms companies, including Vodafone, which agreed to sell an 81.7 percent share in Vantage Towers in November, and Deutsche Telekom, which in July announced a plan to sell a 51 percent stake of GD Towers.
Telecoms companies “feel that infrastructure is not necessarily core to the offering they give to customers”, said Stathopoulos. “A telephone operator differentiates not through the infrastructure, it’s through the product and service and everything else. That was the main driver.”
GD had an enterprise value of €17.5 billion, while pro forma adjusted EBITDA after leases (EBITDAaL) was €640 million, implying a valuation of 27.3x. Vantage a few months later had a total enterprise value of €13.9 billion with EBITDAaL of €543 million, implying a valuation of 25.5x.
TowerCo did not fetch quite such a multiple – at €1.22 billion on a cash-free and debt-free basis, it had a valuation of 20.1x.
“Tower companies may have traded slightly higher than 20x in the past, but inflation rates and interest rates have had an impact,” said Stathopoulos. “But the fact it was still able to get that multiple is a testament to the quality of tenant that United Group is going to be.”
Like other tower sales, United will keep using the infrastructure, even though unlike Vodafone and Deutsche Telekom, it sold 100 percent of the towers business.
“You end up having a 20-year relationship with the buyer,” said Stathopoulos. “It’s very important to legislate for that kind of relationship – how will the rent change, the maintenance, who’s responsible, there’s a lot of elements coming into this you need to negotiate. That’s why it’s never a traditional transaction like buying and selling an asset.”
There were “a lot of interested parties” in forming that relationship, said Stathopoulos, via the Goldman Sachs-run auction.
“We narrowed down the field to less than a handful during the second round, and Tawal ended up being the winning bid both because of its strategic nature as a group and also as it was the highest bidder,” he said. “They were there for day one but were not alone. There were some infra funds, some strategies backed by PE, interest from Phoenix International, Blackstone, groups like Actis, which is an infra fund. We had interest from a couple of others.”
The eventual winner Tawal, a subsidiary of stc Group, is an ICT infrastructure provider in MENA and is based in Riyadh, Saudi Arabia. The acquisition of TowerCo – which while operating in southeast Europe is headquartered in Hoofddorp in the Netherlands – was the company’s first move into Europe, giving it additional interest in the towers, according to Stathopoulos.
On hold
BC Partners, a London-headquartered investment firm with more than €40 billion in AUM and present in private equity, private debt and real estate, had been preparing the sale of the towers for about a year and a half.
United had towers in Slovenia for several years, but the assets were too small to sell, said Stathopoulos. After acquiring telecoms businesses in Bulgaria and Croatia, the number of towers it held was over 4,800, a “critical mass” that would interest a buyer.
“Infra can trade at very high multiples,” said Stathopoulos. “This was really the impetus. The timing was due to whenever we were ready to package that portfolio together, and frankly, despite the headwinds we’ve experienced – the war in Ukraine, inflation and rates being higher – we were still able to achieve a very attractive price.”
The sale leaves fibre as United’s only infrastructure asset. It will be the focus of any infrastructure development and investment.
For the wider company, which Stathopoulos said had quadrupled in size since BC bought it from KKR in March 2019, there is still organic growth and M&A potential in neighbouring countries, meaning an exit is likely some way off.
United is active in eight countries in southeast Europe – Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Montenegro, North Macedonia, Serbia and Slovenia – with 15 million users and almost €2.7 billion in annual revenues. Growth since BC’s takeover was organic and via add-ons in Bulgaria, Greece and Croatia.
The southeast Europe markets are less mature and less penetrated with mobile telecoms, said Stathopoulos. “You have the ability to grow more than in more mature western Europe. There’s still a lot of juice left in that company.”
Given the size and growth profile of the firm, all exit routes – an IPO, strategic sale or financial investor – will be open when the time comes to sell, according to Stathopoulos. The sale of the towers would be neutral to the attractiveness, given most operators have disposed of theirs, Stathopoulos added.
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