Vodafone targets Frankfurt listing for mast business in early 2021

Vodafone (VOD.L), the world’s second biggest mobile operator, said on Friday it would list its European mobile masts business, newly named Vantage Towers, in Frankfurt in early 2021.

Chief Executive Nick Read said the launch of Vantage Towers was a major step in improving the return from Vodafone’s assets, an objective he outlined when he became CEO in 2018, and floating a minority stake would unlock value for shareholders.

He said there was investor demand for the steady income from tenants on the masts, anchored by Vodafone itself, which will account for about 90% of the initial revenue.

“We are just at the start of the 5G cycle when operators and government are looking to expand coverage,” Read said, adding that data usage was ever increasing.

“These trends create good growth opportunities for a towers business and Vantage Towers is well positioned across each of its markets to capitalise,” he said.

Read said the size of the stake to be floated had yet to be decided, although Vodafone would retain a majority.

Frankfurt was chosen over London because Germany was home to the biggest number of towers in the unit, he said.

Vodafone’s shares were down 4.5% in morning trading, as analysts said the pro-forma core earnings Vodafone attributed to the tower business were below expectations.

Jefferies said the tower business’s earnings looked to be 8-10% below the 900 million euros ($1.04 billion) previously indicated, with Vodafone putting the difference down to factors including adjusted anchor tenant fees.

The company had announced the creation of a European mast business worth upwards of 18 billion euros a year ago.

The spin-out, which has more than 68,000 mobile towers across nine European markets and is led by Vivek Badrinath, became operational in May.

As part of the towers initiative, Vodafone said it had created Greece’s largest tower company through a deal with Crystal Almond, the controlling shareholder of Greek mobile operator Wind Hellas, which will be added to Vantage.

The new company will also include a 33.2% stake in INWIT, Vodafone’s joint venture with Telecom Italia (TLIT.MI), and Vodafone said it could also add its 50% stake in UK masts company CTIL, its joint venture with Telefonica’s (TEF.MC) O2.

Rothschild is leading the IPO, sources said. UBS (UBSG.S) and Morgan Stanley (MS.N) are also involved, Reuters reported earlier this month.

Vodafone also reported a 1.3% decline in first-quarter organic service revenue, which it said was mainly due to COVID-19 impacts, particularly on roaming revenue as customers locked down. It reiterated its guidance for the year.