Telus’s tower network had estimated revenue of $160-million last year and cash flow of $110-million, according to the documents.Andres Valenzuela/The Globe and Mail
Telus Corp. T-T has formally put a stake in its countrywide cellphone tower network up for sale with an estimated $1-billion-plus price tag, as Canada’s three largest telecoms attempt to raise cash to pay down debt and fund growth plans.
Vancouver-based Telus hired TD Securities to pitch institutional investors and tower owners on acquiring a 49.9-per-cent stake in its 3,000-tower portfolio, according to sources familiar with the process. The Globe and Mail agreed not to name the sources because they are not authorized to speak about the process.
The investment bank launched the auction in February under the code name Project Air and sent potential buyers a pitch book detailing the division’s financial performance.
Telus’s tower network had estimated revenue of $160-million last year and cash flow of $110-million, according to the documents. TD TD-T is targeting private equity funds, pension plans and U.S. and European tower operators.
In an interview, Telus chief financial officer Doug French said the pitch deck is part of a months-long detailed plan to assess interest in the company’s “redundant” assets. He said the tower assets have received broad interest from all over the world, and that the company would consider bids from interested parties from any geography.
He declined to provide a date for when first bids would be due, but said the process was “well under way.”
Rivals will be watching the deal closely, as they are also considering spinning off parts of their own networks. The potential sales would bring the Canadian telecom giants in line with their global peers, who have been selling their towers and other network infrastructure for decades.
On Wednesday, CIBC analyst Stephanie Price said in a report the towers could be worth between $1-billion and $3-billion, an estimate based on data from regulators and previous deal valuations. Last week, Bank of Nova Scotia analyst Maher Yaghi also estimated a Telus tower spinout could bring the company between $1-billion and $1.5-billion.
These estimates suggest the sale of a minority interest in the business could raise between $500-million and $1.5-billion. Sources said Telus would only go ahead with a sale if its towers fetch a price near the top end of the range.
Mr. Yaghi suggested Telus could be aiming to bring in a minority partner to manage the towers and to attract additional tenants, such as Quebecor Inc. or Cogeco Inc.
If a minority stakeholder is selected, company sources says that Eros Spadotto, former executive vice-president of technology strategy and business transformation, will be tapped to lead the new entity.
Telus’s portfolio is two-thirds ground-based towers and a third located on rooftops. Half the towers are in major urban centres.
TD Securities didn’t immediately comment on the tower sale process. Speaking to analysts last month, Telus chief executive officer Darren Entwistle said the company would consider tower sales.
“If we like the economics, if we like the deal, if we like what could be done with that particular asset post monetization, it is something that we would consider along the way, and we think it is our responsibility to do exactly that,” Mr. Entwistle said.
Telus currently has about $29-billion of debt. In a recent call with analysts, the company outlined its plans to reduce its leverage, including its goal of bringing in about $500-million from selling copper from networks it replaced with fibre, and said it could raise up to $3-billion by selling real estate it no longer needs.
Given the uncertainty about whether such deals would be considered debt or equity, Mr. French said Telus reached out to credit rating agencies to learn how they would interpret the deal. All of them considered it “majority equity treatment,” he said.
“To the extent of deleveraging, we would be achieving our purpose,” he said.
In a press release Wednesday, the company said it would use all the proceeds from any tower sale to pay down debt.
Last week, Bank of America downgraded its rating on Telus stock, partly over concerns with the telecom’s debt levels.
“We believe management has a credible plan and that in the next couple of months, we will begin to see the execution of that plan make a dent in reducing leverage,” said Bank of Nova Scotia’s Mr. Yaghi.
Bell Canada parent BCE Inc. and Rogers Communications Inc. have no plans to sell their tower networks at this time, sources say, but are monitoring the Telus sales process. Mr. Yaghi estimated Rogers’ towers could be worth $6-billion, and valued BCE’s network at up to $4-billion.
Canada is unique among developed markets in that its carriers have not spun off their tower assets, according to Sean McDevitt, who leads the North American telecom practice at Boston-based consultancy Arthur D. Little.
Global telecoms have been divesting passive infrastructure assets for two decades, often to private equity or infrastructure funds, as part of strategic realignments of their businesses, he said. Broadly, telecoms are facing declining returns on their infrastructure investments and increased competition, and the advantages of owning their own networks have started to fade.
But until recently, Canada’s major telecoms have chosen to own their infrastructure, based on the logic that controlling towers and other assets is critical to efficiently delivering services. About 95 per cent of towers are owned by the carriers, but in the U.S., carriers own 3 per cent, and in Europe, about 30 per cent, Mr. McDevitt said.
Last October, Rogers broke ground by announcing plans to sell a minority stake in its wireless backhaul business to private equity fund Blackstone Inc. for approximately $7-billion. However, that deal has yet to close, with some uncertainty around whether the deal would count as equity or debt for Rogers.
Bell Canada has said it is considering telecom infrastructure sales to raise money. In a February call with analysts, chief executive officer Mirko Bibic said the company had retained financial advisers to help it assess the value of these assets. In September, BCE agreed to sell its stake in Maple Leaf Sports & Entertainment to Rogers for $4.7-billion.
Global telecoms sold their towers and used the money to invest in fibre networks, artificial intelligence and other growing sectors. Last September, for example, Verizon Communications Inc. – one of the largest U.S. telecoms – raised US$3.3-billion by selling its 6,339 towers to Vertical Bridge REIT LLC, a telecom infrastructure operator which now runs more than 11,000 towers.
Canadian asset managers are significant investors in telecom towers around the world and are expected to bid on Telus’s network.
In 2022, Toronto-based Brookfield Infrastructure Partners LP teamed up with Florida-based DigitalBridge Group Inc. to acquire 51 per cent of Deutsche Telekom AG’s 33,000 towers in a transaction that valued the network at US$17.5-billion, including debt. The same year, the Ontario Teachers’ Pension Plan acquired a 70-per-cent stake in a New Zealand tower business with 1,200 sites for about $740-million.
And Canada ranks third in the world for the proportion of towers to subscribers, Mr. McDervitt said, meaning there are lots of potential assets for sale.
“I know a lot of private equity and investment funds who have for years longed for the opportunity to invest in the Canadian tower market,” Mr. McDevitt said. “There are not a lot of big tower opportunities in the world, and Canadian towers would be a very big and very attractive asset. Everyone would look at it.”