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- Telstra (TLS) agrees to sell a 49 per cent stake in its mobile tower business to a consortium of funds for $2.8 billion
- Half of that amount will be returned to shareholders, potentially through a share buyback
- The remaining half will be used to reduce debt and improve Telstra’s connectivity in regional Australia
- The sale is a key milestone in the telecom provider’s T22 strategy, which was unveiled in June 2018 to simplify operations and reduce costs
- Shares in Telstra are up 4.17 per cent to $3.75 at 10:42 am AEST
Telstra (TLS) has agreed to sell a 49 per cent stake in its mobile tower business to a consortium of funds for $2.8 billion, half of which will be returned to its shareholders.
The Future Fund, Commonwealth Superannuation Corporation and Sunsuper will come on board as strategic partners, purchasing a minority interest that allows Telstra to retain control of the active parts of its network, like radio access equipment and spectrum assets.
While it’s not yet known exactly how the proceeds will be returned to shareholders, further information will be provided with Telstra’s full-year results in August. According to this morning’s announcement, however, the plan may include a share buyback at some point in the 2022 financial year.
“The remainder of the proceeds will be used for debt reduction to ensure we maintain balance sheet strength and flexibility,” Telstra chief executive Andrew Penn said.
“This level of debt reduction is important to deliver a broadly neutral credit outcome given the long-term Tower access obligations created by the transaction.”
Around $75 million of the remaining half will also be used to bolster Telstra’s connectivity in regional Australia. The telecommunications giant said it would be guided by the recommendations of the Regional Telecommunications Review Committee in directing the investment, which Telstra said recognises the importance of expanding into more rural areas.
The sale of the towers business — known as InfraCo Towers — values the whole network of 8200 towers at around $5.9 billion, and represents a key milestone in Telstra’s three-year T22 strategy, which was unveiled in June 2018 to simplify its operations and reduce costs.
“Today’s announcement is a further endorsement of the strategy, as the establishment of our infrastructure assets as a separate business was designed to enable us to better realise the value of these assets, take advantage of potential monetisation opportunities and create additional value for shareholders and that is exactly what today’s announcement achieves,” Mr Penn continued.
He said InfraCo Towers had already been delivering efficiencies since it was established as a standalone business, and that the trend is likely to continue over the long-term with added investments in new infrastructure, services and technology, and competitive market offerings.
Telstra had previously intended to seek strategic partners for InfraCo Towers early next financial year, but was approached by the consortium of funds at the start of 2021, which Mr Penn said “provided a compelling rationale to progress the transaction ahead of schedule”.
“We believe the value of the transaction; the high calibre consortium members and the terms of the agreement which protect Telstra’s network differentiation, support our decision to accelerate the process.”
Shares in Telstra are up 4.17 per cent to $3.75 at 10:42 am AEST.
