Orange is moving ahead with plans to spin off its European mobile towers into a new company. Called Totem, the new business should be operational by year-end, the company announced.
Orange first presented plans to create its own tower company at the end of 2019, as part of its five-year strategic plan. At the time it sold off some of its infrastructure in Spain to Cellnex. Totem will start with managing around 25,500 sites remaining in Spain and France, Orange's two largest countries. Additional countries in Europe may be added later, Orange said.
The bulk of Totem's business will be in France, with 17,000 sites. With around 55 percent of sites towers and strong co-location demand, Orange sees significant room for revenue growth in this market. Spain contributes another 8,000 sites, split roughly equally between towers and rooftops.
Given its existing agreements to use the sites, the tower company would have generated over EUR 500 million in revenues and nearly EUR 300 million in EBITDAaL in 2020, of which around two-thirds comes from France. The company will focus on organic growth, with the aim of increasing the co-location rate from 1.3x in 2020 to 1.5x in 2026 and adding up to 3,000 sites over the first eight years based on demand from Orange. As an independent company, it will also have the means to finance acquisitions through equity or debt, if opportunities arise.
The framework agreement provides for an initial 15-year contract with Orange with a tacit renewal of twice for 10 years, at market rates with inflation increases. Orange would hold on to the bulk of its strategic sites in France.
While Orange expects to retain ownership of Totem, the company will have a fully independent legal structure and its own management. The new management, including two independent directors, will be appointed in the first half of this year.
