Australian operator Telstra has announced that a consortium comprising the Future Fund, Commonwealth Superannuation Corporation and Sunsuper will become a strategic partner in Telstra InfraCo Towers after agreeing to acquire a 49 percent interest. Telstra’s Towers business currently has around 8,200 towers across Australia.
Transaction details
The transaction values Telstra InfraCo Towers at AUD 5.9 billion, Telstra also said. Telstra expects net cash proceeds after transaction costs of AUD 2.8 billion at completion and the Towers entity will have no debt. Completion is expected in the first quarter of FY22. Telstra intends to return around 50 percent of net proceeds to shareholders in FY22.
Telstra says its objective in seeking a strategic partner has been to maximise overall value for its shareholders, maintain control of the assets and agree terms to support Telstra’s mobile network services in the future.
Telstra initially planned to start the process to seek external strategic investment in the Towers business in early FY22, with a view to completing any transaction by the end of the 2022 calendar year. However, Telstra reports it was approached by the consortium earlier in the year for the sale of these assets and decided to progress the transaction ahead of schedule.
Under the terms for the deal, Telstra would retain majority ownership of InfraCo Towers and continue to own the active parts of its network, including the radio access equipment and spectrum assets.
Telstra has entered into a 15-year agreement (with the option to extend) with InfraCo Towers to secure ongoing access to existing and new towers.
Half of proceeds to shareholders
A large proportion of the funds would be returned to shareholders. "We will apply the net proceeds consistent with our capital management framework. We will be investing AUD 75 million from the proceeds to further enhance connectivity in regional Australia. Telstra will be guided by the recommendations of the Regional Telecommunications Review Committee (RTRC) in directing this investment recognising the importance we place on building and deepening connectivity in regional Australia," said CEO Andrew Penn.
"We then expect to return 50 percent of net proceeds to shareholders. We anticipate providing further details about the manner in which we will return those proceeds, including a potential share buy-back in FY22, at our full-year results in August. The remainder of the proceeds will be used for debt reduction," Penn added.
InfraCo Towers management
InfraCo Towers will operate under a board chaired by InfraCo CEO Brendon Riley, and comprising other Telstra and consortium representatives. The CEO will be Jon Lipton, currently head of the towers business within Telstra.
Telstra announced earlier this year the proposed legal restructure of the Telstra Group including InfraCo Towers; InfraCo Fixed, which would own and operate Telstra’s passive or physical infrastructure assets that underpin Telstra’s fixed telecommunications network and ServeCo, which would continue to focus on creating new products and services. Telstra also plans to establish its International business under a separate subsidiary within the Telstra Group.
