Did Optus just get a better deal than Telstra (ASX:TLS) for its towers?

A man talking on his mobile phone looks uncertain

The Telstra Corp Ltd (ASX: TLS) share price has dipped as the end of the week nears. However, the story of the day is the sale of its biggest competitor’s tower network.

In news sure to perk up the ears of telecommunications investors, Optus has sold a 70% interest in its Australian mobile tower network. Interestingly, this is happening a few months after Telstra carried out its own 49% sale of its InfraCo Towers.

Which begs the question, how do the deals stack up against each other?

How does the Optus sale compare to its ASX-listed competitor Telstra?

Yesterday, news broke that Singapore Telecommunications owned Optus had proposed to sell 70% of its shares in Australia Tower Network (ATN). According to the release, the sale of its network consisting of 2,312 towers is to AS Infra, which is owned by Australian Super.

Furthermore, the deal is valued at A$1.9 billion, comprising three payments. Where it gets interesting is the valuation of Optus’ network in comparison to the sale of the towers previously owned by ASX-listed Telstra.

Telstra managed to garner a payout that reflected 28 times the earnings before interest, tax, depreciation, and amortisation (EBITDA). This was for a 49% interest in the company’s InfraCo Towers which came to a total of $5.9 billion. A consortium of investors including Future Fund, Commonwealth Superannuation, and Sunsuper agreed to cough up the cash.

Meanwhile, 3 months later and Optus has pulled a sale price that represents a much higher EBITDA multiple of 38 times. This is interesting considering the Telstra sale involved around 8,200 towers. That would give it the title of the largest mobile tower infrastructure provider in Australia.

Setting records

In fact, it is understood the earnings multiple for Optus’ assets is a global record for a tower sale, beating out Telstra on the ASX.

Commenting on this, Optus chief executive Kelly Bayer Rosmarin stated:

We obviously think that what we achieved in terms of valuation reflects the strong quality of our assets and relatively high tenancy ratio that we have with room to grow.

The sale of these assets positions Optus well for the future as it provides capital to support core business growth while importantly allowing us to maintain the competitive advantage of our network’s active elements which continue to top independent reports on speed and quality of our network.

While Telstra investors might feel disappointed by its cheaper sale multiple for its tower assets, there is more worth considering.

Potentially, bidders were willing to pay a higher premium for ATN considering it was for a controlling stake. That means Australian Super will now call the shots when it comes to decision-making for the network. Whereas, Telstra sold a minority interest of 49%.

What’s next for Optus?

Following the sale, Optus will lease back the use of the towers from Australian Super. This strategy unlocks a large amount of capital for the Telstra competitor to expand upon its 5G ambitions.

Finally, the transaction is expected to be completed in October. In contrast, ASX-listed Telstra was expected to complete its transaction before the end of September. However, there has not been an announcement to confirm this yet.

The post Did Optus just get a better deal than Telstra (ASX:TLS) for its towers? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Telstra Corp right now?

Before you consider Telstra Corp, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Telstra Corp wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3F9SFqk

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s