Is the telecom of the future so unpowered?

What is the key asset of telecoms today, what is their main business? Network construction, its maintenance, service provision or customer base? The answer is: everything at once, although each and every one of them can be an independent business. Especially in today's outsourcing world.

Orange is analyzing the sale of half of its shares in its fiber network, reports Bloomberg. There is a billion euros involved. Earlier, this operator signaled work on the valuation of cell masts. Similar analyzes are conducted by Play, where the transaction value is estimated at EUR 800 million. Plus, for a long time, he has been looking for eager for his masts, although he can hardly do it, which is discussed later in the column.

Transactions' intentions

The infrastructure is divided into passive (i.e. masts and various brackets) and active (antennas and transmitters). The sale of this passive is a trend visible all over the world. Most in the US, but also in several European countries such as Spain, France and Italy. There are several companies and funds on the market that specialize in this type of acquisitions.

Why do funds buy masts? Because it is a stable, long-term source of income. First, a contract for collocation of antennas from the original infrastructure owner. Then searching for customers for a free place, also among local operators providing Internet access services, which now rather among four operators no one is playing too much.

Why do operators sell masts? Because they stopped considering them as key assets. In Poland, soon everyone will have (or be able to have) a similar number. Do you need to own the passive infrastructure, or is it enough space to hang the antennas? In addition, the valuation of the assets sold is much more attractive than the entire telecom. Let's look at the Orange case. Fiber optics would be valued at EUR 2 billion, Orange has only masts less than Play, so let's add EUR 500 million in such a transaction. EUR 2.5 billion is over PLN 11 billion with the current stock market valuation of "orange" at the level of PLN 9.5 billion. It's just infrastructure, but what about a powerful customer base, a copper network, and exchanges that would be worth less than zero in such an equation?

Escape forward

Of course, the sale of passive infrastructure is trade-off: you get money in advance for the masts, but the cost of maintaining the network increases, because the rent paid for renting space for antennas increases. After a dozen or so years, the balance breaks zero and goes to minus. But several years is a terribly long perspective and a distant future for telecoms. Nobody knows how this business will look then, will the masts be a business burden or not? And the money for investing in the 5G network and reducing debt will be useful here and now, especially with the very encouraging valuation of the assets sold.

The sale of masts is another step in telecom outsourcing, one of the most spectacular in recent times. Installation of subscriber equipment, maintenance and construction of the network have long been carried out by external entities. Plus it goes even a step further and is looking for a buyer not only for passive but also for active infrastructure. For now, no one is eager to take over the "green" antennas, because the funds and companies are not more competent than the maintenance of cast iron and looking for customers to fill vacancies on it. Such a transaction would be a sensation, but Zygmunt Solorz has always been a visionary and who knows if, once again, after the world's first LTE network at 1800 MHz, he would not set new global trends.

Who will sell their masts first?

5G networks, and later probably 6G (in less than 10 years), are mainly cities and large clusters of people. These will be mostly small transmitters the size of Wi-Fi routers. For this masts are not so much needed, at least it may seem. Is it time to make such key decisions or are they all falling victim to the sheep's rush?

Who will first break and sell their infrastructure? If he negotiates a high price, he will be the winner. Then there will be a fierce fight for second place, because the domino effect will come. The benefit for local communities will probably be to reduce the number of steel constructions that are duplicating and spoiling.

On the other hand, as the funds delve into the subject of a complicated investment process, probably lasting the longest in Europe (2 years), various legal interpretations of local governments and numerous protests of local communities and national associations against base stations, the face may be a bit diminished. But the more problems you have, the more opportunities you have for business, although these risks weigh on your valuations.

Witold Tomaszewski. Founder and long-term editor-in-chief of TELEPOLIS.PL , later responsible for supporting the investment process of building the Play network in the field of public relations. Now an independent advisor operating on the telecommunications market, specializing in communication strategy and the legislative process. Specialization: 5G.



Is the telecom of the future so unpowered?

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