November 15, 2017 / 8:17 PM / a year ago

Cellnex may raise debt levels as European towers deals heat up

BARCELONA, Nov 15 (Reuters) - Cellnex, which aims to consolidate the wireless towers markets across Europe, suddenly finds itself in a buyer’s market for assets and is ready to raise its debt levels to win certain deals, Chief Executive Tobias Martinez Gimeno said on Wednesday.

The company, which is especially active in Spain and Italy, has acquired some 25,000 towers across Europe to help wireless operators in six European countries cut the costs of delivering high-speed 4G calling and data services to customers.

Cellnex has catapulted to No. 1 European player with a four-fold increase in the number of towers it owns since 2014.

Earlier on Wednesday, two of Europe’s biggest telecom players - Deutsche Telekom of Germany and Altice of France - told an investor conference they were no longer committed to hanging on to tower network assets and would consider selling them.

Speaking at the same event - the annual Morgan Stanley European Technology, Media and Telecoms conference, Martinez said Cellnex was prepared to accept higher debt levels of up to 6.5 times debt to equity to consolidate key European markets.

“I think today this is an opportunity to leverage as much as possible,” Martinez said in response to an analyst’s question during his presentation at the investor conference.

Cellnex already leases wireless networks to customers including Telefonica in Spain, Wind and Iliad in Italy, Bouygues in France, and Sunrise in Switzerland, Martinez said.

In Switzerland, it has received financial backing from Deutsche Telekom Capital Partners, which could set the stage for further deals with the telecoms giant, he said, if Cellnex proves its value in the Sunrise deal, which formally closed in September.

“We do not have any further commitment from Deutsche Telekom beyond Switzerland: This is a fact. But it is also an opportunity to create optionality to show what we can do for them,” Martinez told investors at the conference, referring to Deutsche Telekom.

Deutsche Telekom owns around 28,000 towers in Germany and another 5,000 towers in both Austria and The Netherlands - significantly more than all of the assets Cellnex now owns.

“But why not?” Martinez said when asked whether he would consider such an outsized deal.

In general, Martinez stressed that the company’s primary strategy was - sooner or later - to consolidate the European towers market.

“If we have to reach (a) 6.5 times ratio - it is not our regular target - yes, for very attractive deals, we would be prepared to do that,” Martinez said on the sidelines of the conference. Nonetheless, he said the company remains committed to keep debt levels at four to five times core earnings in 2020. (Reporting by Eric Auchard; Editing by Adrian Croft)

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