Singtel Optus has taken a shot at its bitter rival in the mobile market, Telstra, casting doubt over its plans to sell its prized cellular towers in a radical structural overhaul that has excited investors.
Telstra this week announced a plan to split its operations into three divisions, including setting up a new unit that will house its valuable mobile infrastructure. The unit could be sold for up to $4.5 billion, according to market estimates, and raises the prospect of a potential capital return to shareholders.
But Optus has already flagged intentions to sell its portfolio of mobile towers, valued at over $2 billion, and the telco’s boss Kelly Bayer Rosmarin said Telstra was playing catch up on extracting full value from its infrastructure. “As the market knows we are well underway in looking into our potential towers sale,” she said. “We feel like we have fantastic assets…I think imitation is the finest form of flattery and shows that our strategy is spot on,” she said.
News of the restructure lifted Telstra shares, which have traded near decade lows during the COVID-19 pandemic. On Friday the stock rose another 1.6 per cent to $3.13.
A sale of the mobile towers would mark a significant strategic shift for the nation’s dominant telco. Andrew Sheridan, Vice President, Regulatory and Public Affairs at Optus said Telstra has traditionally been reluctant to share it mobile towers with other telcos.
“There will need to be a cultural shift at Telstra to pursue the (new) model.” “Our towers have a higher occupancy, though JVs and our participation in Mobile Blackspot program.”
“Also, while they have more towers, they’ve indicated the locations are deep and remote – so interest may be limited,” Mr Sheridan added.
Passive infrastructure like exchange buildings and mobile towers have become attractive targets for specialist investment funds looking for assets offering steady income streams. Meanwhile, telcos are also keener to spend their money on new spectrum and small cell network equipment than on maintaining older towers.
Telstra’s proposed restructure, which is a nod to these trends, has was welcomed by analysts, who say the process should help the market better understand the value locked in the telco’s assets.
UBS analyst Eric Choi said while it was still unclear how many towers Telstra will choose to sell, any transaction would be a net positive for the telco.
“Our analysis suggests around 20 to 25 cents per shareof valuation upside (though we have not factored any tax leakages – it remains unclear at this stage whether there will be any),” he said in client note on Friday.
He added that a two-way race between Telstra and Optus to sell their towers could potentially lead to a mega-deal.
“The timing of both mobile asset monetisation processes could present opportunities for an investor to look at both assets in concert – and perhaps realise greater synergies (regulation and other factors permitting).”
Source: Thanks smh.com