Sources suggest that a joint bid by the two companies could be in the works, finally giving Cellnex access to the German market

Deutsche Telekom has been looking to spin off its German tower business, Deutsche Funkturm, since at least December 2021, following a broader trend across the telecoms industry to sell off passive infrastructure in exchange for quick cash.

At the time, Deutsche Telekom said it would be open to selling up to a 51% stake in the business, but would also be open to approaches for smaller pieces of the business.

By March, it was clear that investor interest in Funkturm’s roughly 40,600 mobile towers within Germany was very high, with numerous suitors reportedly in talks for the unit, including European tower giant Cellnex, US infrastructure firm American Tower, Vodafone’s newly spun-off Vantage Towers, and Orange’s tower unit Totem.

Now, reports from Bloomberg suggest that Cellnex is in discussions with Canada-based investment firm Brookfield Asset Management for a joint bid for Funkturm. 

According to source, the deal could be worth around €20 billion including debt.

If such a deal were to come to pass, it would be a major feather in the cap for Cellnex. In recent years, the company has been on an enormous M&A spree within Europe, rapidly becoming the largest independent tower operator on the continent. Back in 2020, the company notably struck a deal to acquire all of CK Hutchison’s European tower assets, paying €9 billion and bringing their tower portfolio to over 100,000 sites in various markets.

Germany, however, notably remains one of the last major European markets where the company has been unable to secure a foothold.

Deutsche Telekom owns roughly 50% of Germany’s towers, while Vantage and American Tower Corp (AMT) have 30% and 20%, respectively.

This current balance of power in Germany’s tower industry could, in fact, work in Cellnex’s favour, with regulators likely to look less favourably on approaches by AMT and Vantage Towers, since the acquisition by either company would give them a dominating majority share of the German market.

Nonetheless, a deal between Cellnex and Brookfield is far from finalised, however, with the sources noting that Brookfield is also considering a solo bid for the tower unit. 

Additional private equity firms, including Stonepeak and DigitalBridge, are also considering investing, say the sources.

Binding bids for Funkturm are expected in the next few weeks.

In related news, recent reports suggest that a “significant number” of Deutsche Telekom remain in Russia, despite the company announcing it would discontinue its Russian operations back in March, in protest against the Russian invasion of Ukraine. 

Deutsche Telekom’s exit from the Russian market is expected to take place next year. The company’s existing 2,000 staff based in Russia will reportedly have the option of relocating to the companies other locations.

How would Cellnex’s entry into the German towers market impact the country’s mobile ecosystem? Find out from the experts at this year’s live Connected Germany
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