Europe has seen four transactions involving broadcasting tower businesses in less than 12 months and we understand that others could follow in the coming months. The four European transactions are:
- December 2010 – Macquarie acquired CRA (Czech Republic) from Falcon (Mid Europa) for around EUR574 million (source: The Australian)
- March 2011 – Montagu acquired Emitel (Poland) from Telekom Polska for around EUR432 million (source: unquote.com).
- June 2011 – Infracapital acquired Alticom (Netherlands) for around EUR100 million from TDF, which bought it four years earlier (source: Telecompaper)
- October 2011 - Antin Infrastructure Partners acquires Spain's Axion for EUR115 million (source: InfraNews)
This suggests that there is still a significant appetite among private equity investors for these assets, even if current market conditions have moderated the return they can now expect from these businesses (as well as from other classes of asset), among other things because of lower levels of leverage available under current market conditions.
In assessing investment opportunities of this kind, investors (particularly those in the USA) need to remember that broadcasting tower businesses in Europe are very different from typical mobile tower businesses that are quoted on the stock market, like American Towers. Although these companies do earn significant revenues from mobile operators, TV and radio broadcasting services account for the majority of their existing and future revenues. This means that any assessment of this kind of business must focus on understanding specific TV and radio market issues and challenges that will determine future growth and hence the case for investment. Despite significant differences between the audio-visual markets in the Czech Republic, Poland, the Netherlands and Southern Spain, there are some common issues that need to be examined in detail for this kind of investment:
- The evolution of digital terrestrial TV (DTT) and potentially digital radio (DAB) services, particularly in connection with the switch-off of analogue services
- The long-term prospects for DTT as a platform in a multichannel environment, given the increasing offering of multi-play services and the growth of over-the-top (OTT) TV services, whether dominated by free to air (FTA) or pay TV
- Spectrum decisions and the potential upsides or downsides associated with these, particularly in terms of the number of TV multiplexes that could be offered for standard TV and HDTV, FTA or pay TV, and in some cases the desired number of regional and local TV channels
- The implications of the regulatory (ex-ante) and competition (ex-post) environment for the transmission of terrestrial TV services.
The four deals mentioned earlier show that investors must have reached positive conclusions on issues of this kind, given their decision to make the acquisitions. Each of the recent deals provides a useful reference for future transactions of this kind. However, it is important to note that each of these investments will have been made on the basis of a very distinctive business proposition in a particular market environment that had to be assessed on its own merits. The case of Alticom in the Netherlands is particularly noteworthy. This is because the success of DTT has surprised many analysts, given the Netherlands’ reputation as a cable-dominated country. The success of the pay-DTT model in the Netherlands could provide a good reference point for other markets where DTT might initially appear to have only a marginal role, which would have made the case for investment in a broadcasting tower company a challenging one.
We advise governments, regulators, broadcasters, media players, operators and investors on media regulation issues and beyond.
Our media experience encompasses:
- commercial TV and advertising
- pay TV, content exclusivities and consumer spend
- public service broadcasting and State aid
- alternative TV transmission networks strategies
- media and telecoms operators
- non-linear TV and new business models.
In particular, our media experience includes the impact of regulation on media transaction support – not just terrestrial broadcasting networks but also cable TV, satellite TV and commercial broadcasters across all regions.