Data demand propels valuations of European mast owners

MILAN: Surging data traffic and a push to merge capital-intensive networks to cut costs are swelling the value of Europe's mobile infrastructure as it is gradually split away from the telecom industry that built it.

The companies that operate cellular phone masts make most of their money renting antenna space to mobile service providers, creating a real estate type of return because the contracts tend to run for many years.

Low interest rates have buoyed the valuations of the telecom tower companies, but their growth prospects hang partly on whether more operators are willing to sell their masts so their new owners can make them more efficient and profitable.

How soon that will happen is still uncertain.

Whereas in the United States four-fifths of masts are in the hands of independent companies, around 75 percent of those in Europe are still owned by the telecom operators, according to Barclays.

That has begun to change, bringing opportunities for mast owners like Italy´s INWIT and Spain´s Cellnex Telecom to expand their portfolios and consolidate more than one network onto a single mast, increasing return on capital while clearing skylines of unsightly poles and transmitters.

"Mobile operators are facing the nightmare of how to monetise growth in data traffic so will increasingly be willing to outsource infrastructure to cut costs," INWIT's Chief Executive Oscar Cicchetti told Reuters.

Tenancy ratios - the number of operators using a single mast - are 1.6 to 1.9 in Europe, compared with 2 to 3 in the United States, industry figures show.

INWIT and Cellnex were spun off and listed last year by Italy´s Telecom Italia and Abertis of Spain, respectively, and are now looking to extend their reach.  Cellnex has been buying mast portfolios around Europe, recently expanding in the Netherlands and France.  Analysts said financial pressures on telecom companies in Portugal, France and Spain could lead to further sales.  For now, INWIT is focusing on domestic consolidation in Italy, where it sees more scope for cost cuts and growth.