Time for a European tower merger; Orange issue call for cooperation

Orange SA is calling on Europe’s other big phone companies to begin talks about a European tower merger of their wireless towers, an alternative to a full-scale tie-up of the region’s carriers that risks being blocked by European regulators.

Orange said it is not looking to go ahead with plans alone in the towers space, but is seeking a partnership with one or more fellow telcos, ideally Vodafone or Deutsche Telekom.

“Orange wishes to retain control of TOTEM (the company’s tower business) to benefit from the important source of sustainable value creation it provides for the group,” according to the statement. Meanwhile, a statement from CEO Stéphane Richard talked about the telco’s determination to “keep these strategic assets within the scope of the group.”

“We’re looking at those across Europe who share our vision to not sell towers, to join forces and constitute together a real, very powerful tower company,” Richard told said.

Some European phone companies have been struggling in the economic crisis and took precautions such as splitting off their staff and fiber businesses to attract investors and cut the bill for future investments. Spanish tower operator Cellnex has bought a lot of those assets, and last month American Tower Corp. agreed to buy more than 30,000 towers from Telefonica SA for 7.7 billion euros ($9.3 billion) in its first concerted push into Europe.

However, the total sale of Orange’s towers to an independent player like Cellnex would harm the long-term interests of France’s dominant phone company.

For that reason, Richard prefers a combination with the infrastructure of other European phone operators to create a company that can “compete with Cellnex and reach the same size as Cellnex.

“No talks are under way right now, but Orange has received signs of interest in potential infrastructure consolidation,” he added. “Orange’s new tower business, named Totem, will be operational by the end of the year and may eventually include Orange tower assets in more countries.”

But Orange still has other options for TOTEM. The business will have a flexible capital structure that could be open to financial or strategic partners, explained Orange’s chief financial officer Ramon Fernandez. “Listing is not an objective as such, but it could be a means to create value, he said. “It’s a world of opportunities,” he added.

How a tower merger might happen is still unclear: but Orange vows the company will not give up control of the business as the price of a merger or sale.