Spain’s Telefónica said Wednesday it will sell its telephone masts in Europe and Latin America to US-based telecom infrastructure firm American Towers Corp for 7.7 billion euros (US$9.4 billion) in cash.
The sale of the nearly 31,000 mobile phone masts which its Telxius unit owns in Spain, Germany, Brazil, Peru, Chile and Argentina will generate a capital gain of 3.5 billion euros, the heavily indebted Spanish telecoms giant said in a statement.
Telefónica president José María Álvarez-Pallete said the deal would allow the company to focus on its "most ambitious goals" such as the merger of its O2 mobile business with Virgin in Britain, the purchase of Oi mobile in Brazil and debt reduction.
"This is a deal that makes strategic sense within our roadmap," he added in the statement.
Telefónica announced at the end of 2019 that it would focus on its most profitable markets – Spain, Britain, Germany and Brazil – and pull out of its less profitable ones, such as those in smaller Latin American countries, as it tries to reinvent itself in the face of stiff competition.
The former state monopoly said it would use the proceeds of the sale to reduce its debt by 4.6 billion euros.
Telefónica's debt stood at 36.7 billion euros at the end of September.
Under the terms of the deal, American Towers will lease the phone masts back to Telefónica and will maintain jobs in Telxius.
"Telefónica, once again, is looking for new formulas to manage resources in the most efficient way possible," the company said.
Telefónica’s sale of telecommunication masts to American Tower Corp. opens a new front in the race to control Europe’s fast-growing tower industry.
The deal is the biggest threat yet to Cellnex Telecom SA, Europe’s biggest independent tower operator.
Cellnex has snapped up assets across the region without much interference from US rivals, including CK Hutchison Holdings Ltd.’s European masts for around 10 billion euros (US$11.8 billion) in November.
American Tower Cop, which along with US operator Crown Castle International Corp had largely stayed away from Europe, enters just as carriers are spinning off tens of thousands of masts to cut debt and pay for costly 5G rollouts.
US private equity firm KKR & Co owns 40 percent of Telxius and Spanish billionaire Amancio Ortega owns close to 10% percent through his investment vehicle. The main pressure point for Cellnex is the foothold American Tower Corp's gains in Germany, the one big European market where the Spanish company is still absent.
Until recently, there were few opportunities in Europe for independent operators like American Tower Corp, which seek full ownership of mast infrastructure so they can maximise revenue by leasing mast space to as many network operators as possible.
American Tower Corp's Chief Executive Officer Tom Bartlett has flagged interest in doing deals in Europe for the past few years.
The firm said it would pay for the towers in a way that preserves its investment grade credit rating, and has raised financing from Bank of America Corp.
The U..company has focused mostly on building towers in Africa, Latin America and India to sustain its international growth. In 2019 it bought Eaton Towers Ltd. for about US$1.85 billion including debt to expand in Africa. American Tower and Telefónica already have partnerships in Brazil in optic fibre networks.