Telecommunications company Spark has sold a 70 percent stake in its mobile phone towers network to a Canadian investment fund for $900 million.
Photo: 123rf
The Ontario Teachers Pension Plan Board will take the majority stake in the subsidiary, Towerco, which has about 1263 cell phone towers - large and small, as well as rooftop installations - used for Spark mobile and data services.
Spark will retain a 30 percent stake in Towerco and will have a 15-year right of use of the towers, with a right of renewal. Towerco will build at least 670 more towers over the next 10 years.
Jolie Hodson. Photo: Spark
Chief executive Jolie Hodson said the deal offered significant benefits to the company and its shareholders.
"It allows us to deliver better outcomes and service experience for our customers and Aotearoa through faster, more efficient deployment of digital infrastructure, and it better realises the value of our passive mobile assets, maximising value for shareholders and enabling us to invest in future growth opportunities."
The sale valued the overall Towerco at $1.175 billion, which is 33.8 times its assumed operating earnings of $34.8m for the year ended June 2023.
Spark's chair Justine Smyth said the sale would allow direct returns to shareholders.
"When assessing the most appropriate use of proceeds Spark will consider three key pillars - maximising returns to shareholders, investment in future growth, and maintaining financial flexibility through an appropriate investment grade debt rating."
Ontario Teachers is a Canadian public service pension fund investing in long-term infrastructure assets. Its New Zealand investments include forestry and medical service companies.
"This investment builds on our long track record of investing in superior businesses in New Zealand and will draw on our deep experience investing in digital infrastructure businesses globally," the fund's senior managing director Bruce Crane said.
Craig's Investment Partners head of research, Mark Lister, said Spark had fetched a deal better than it had expected. "I think it is a good price," he said.
"We had a run some numbers over these assets and came up with a few estimates and these numbers are running a little bit higher than what we were hoping for."
Lister said the price also looked good when compared to similar sales elsewhere in the sector, which was a positive outcome for shareholders.
He said the beauty of the deal was that someone else was effectively paying for Spark's roll-out of 5G.
The sale also meant the company had a range of options to return value to shareholders or pay down debt, he said.
Lister said there were still questions the terms of Spark's lease agreement for the towers, as it was not disclosed to the market.
The deal requires Overseas Investment Office approval and is expected to be finalised next year.
Bids for Vodafone NZ's network of nearly 1500 towers are due this week, according to Australian media reports, with US investment giant KKR said to be one of the lead bidders.