(Bloomberg) — Deutsche Telekom AG agreed to sell a majority stake in its towers unit in a deal that values the business at 17.5 billion euros ($17.5 billion), one of the largest digital infrastructure deals this year.
Investors Brookfield Asset Management Inc.
and DigitalBridge Group Inc. acquired the 51% stake in Deutsche Telekom’s German and Austrian business, GD Towers, for 10.7 billion euros in cash, according to a statement on Thursday, confirming an earlier Bloomberg News report.
The German telecom company will use the proceeds to lower debt levels and fund plans to gain majority control of T-Mobile US, a key growth driver for the company, it said.
The sale of a stake in Deutsche Telekom’s tower business is set to rank as one of the largest European infrastructure deals this year, according to data compiled by Bloomberg.
Brookfield, a Canadian investment firm, and US infrastructure-investor DigitalBridge teamed up in a last-minute bid for the stake in GD Towers, which operates more than 40,000 sites, emerging as the frontrunners and beating out a KKR & Co.-led consortium.
Brookfield’s previous partner, Cellnex Telecom SA, had dropped out of the bidding.
Deutsche Telekom fell 1.6% at 11:43 a.m. in Frankfurt trading on Thursday. The shares have gained 16% this year.
Deutsche Telekom will retain a 49% stake in the unit, and said it has the right to regain control and re-consolidate GD Towers in the future.
The transaction is subject to regulatory approvals and is expected to close toward the end of the year, Deutsche Telekom said.
“I have always championed an industry solution,” though antitrust issues were a concern if the telecom had sold to a rival, said Thorsten Langheim, Deutsche Telekom’s head of USA and group development.
“It wasn’t the right time, but we won’t discard this as an opportunity going forward.”
Vodafone Group Plc’s listed infrastructure arm, Vantage Towers AG, was among the suitors studying the business earlier, Bloomberg News has reported.
Europe’s phone carriers — facing expensive investments into fiber optics and 5G network upgrades, combined with large debt piles and stagnant share prices — have started selling off infrastructure, such as masts and fixed networks.
Specialist infrastructure funds and investors have grown out of this trend and are buying up towers and networks.
Bonn-based Deutsche Telekom in December signed an agreement with Australian investment manager IFM Investors Pty Ltd. to share the cost of a fiber optic buildout in Germany.
Institutional investors have been drawn to wireless towers because of their ability to generate steady, long-term returns.
KKR raised $17 billion for its latest global infrastructure fund earlier this year, while Global Infrastructure Partners is targeting $25 billion for what would be the world’s biggest pool of capital dedicated to infrastructure investments.
DigitalBridge, which has a market value of about $3 billion, manages almost $47 billion of digital infrastructure assets, such as wireless towers, data centers, fiber networks and edge infrastructure, according to its website.
(Updates with background throughout)
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