Vodafone says Tower IPO is on track for 2021
The company said Friday the initial public offering for the tower unit is on track for early 2021 in Frankfurt, assuaging investors concerned that the pandemic would derail this plank in Read's strategy. Vodafone also said it was merging its towers in Greece with Wind Hellas Telecommunications SA.
“Big picture, everything looks to be on track,” said James Ratzer, an analyst at New Street Research.
The unit, now called Vantage Towers, produces earnings before interest, tax, depreciation and amortization of 680 million euros ($789 million), the company reported Friday. That estimate seems to trail the the 900 million euros the company had flagged about a year ago, Ratzer said.
The decision to list in Germany reflects the high share of tower assets from that country in the new company, and doesn't have anything to do with Britain's departure from the European Union, Read said in a conference call. Advisers had already been invited to pitch for the towers IPO, which was announced last year and was seen raising more than 2 billion euros, at a valuation of between 10 billion euros and 20 billion euros, Bloomberg News reported.
Read declined to put a value on the company, but pointed to the trading multiples of 27 to 28 times earnings before interest, tax, deprecation and amortization enjoyed by Spanish tower rival Cellnex SA. Including the U.K., which Read said puts earnings at about 750 million euros, a similar multiple on Vantage's earnings could imply a value of about 20 billion euros, according to Bloomberg calculations.
The pandemic has nevertheless weighed on sales. Organic service revenue fell 1.3% in the first quarter as coronavirus travel restrictions hit international roaming fees and slowed sales across the globe. There's been a 70% reduction in roaming across Europe so far, and the company said it doesn't expect a recovery in the near term.
The decline comes after a return to growth in the previous fiscal year, a sign Read's push to streamline the company and cut costs had been working.
The second quarter “is usually the highest roaming quarter, so likely to see the biggest pressure,” Andrew Lee, analyst at Goldman Sachs, said in a research note. Friday's report was “reassuring, but not thesis-changing,” and does not prompt a change in his full-year forecasts or Buy rating.
By Thomas Seal