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A wireless mast used by Telefonica SA.
(Bloomberg) -- American Tower Corp. is buying telecommunication towers in Europe and Latin America from Telefonica SA for 7.7 billion euros ($9.4 billion), signaling a new competitive threat in Europe's fast-growing tower industry. Telefonica shares rose as much as 11%.
American Tower is paying cash to acquire around 30,700 tower sites from Telefonica unit Telxius Telecom, Telefonica said in a statement. U.S. private equity firm KKR & Co. owns 40% of Telxius and Spanish billionaire Amancio Ortega owns close to 10% through his investment vehicle.
The deal represents a shift in strategy for American Tower, which along with rival U.S. operator Crown Castle International Corp. had largely stayed away from Europe, where phone companies are trying to raise money from their infrastructure to cut debt and pay for costly 5G rollouts.
Their absence has made it easier for Europe's largest independent tower operator Cellnex Telecom SA to snap up assets across the region. Europe's biggest wireless carrier, Vodafone Group Plc, is working on an initial public offering of its tower unit in the first half of the year.
Telxius has towers in Spain, Germany, Brazil, Peru, Chile and Argentina. The sale is the biggest ever by Telefonica, which expects to make a capital gain of around 3.5 billion euros and cut its net debt of 37 billion euros by approximately 4.6 billion euros.
Telefonica shares were up 8.6% as of 9:06 a.m. in Madrid after rising as much as 11.1%, their biggest intraday gain since November. Cellnex fell as much as 2.1%.
American Tower said would pay for the towers in a way that preserves its investment grade credit rating, and has raised financing from Bank of America.
The U.S. company has focused mostly on building towers in Africa, Latin America and India to sustain its international growth. In 2019 it bought Eaton Towers Ltd. for about $1.85 billion including debt to help it expand in Africa. American Tower and Telefonica already have partnerships in Brazil in optic fiber networks.
Until recently, there were few opportunities in Europe for independent tower companies like American Tower, which seek full ownership of mast infrastructure so they can maximize revenue by leasing mast space to as many network operators as possible.
Phone companies in the region have been reluctant to lose control of the assets, seeing them as strategically important. The deal on Wednesday shows how some are willing to rethink that approach in an effort to reduce costs.
(Adds detail on financing from seventh paragraph)
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