Spark’s mobile towers set to be completely owned by Canadian investors

Thursday, 12 December 2024

Connexa towers will be owned half by Canadian investor CDPQ and half by the Ontario Teachers’ Pension Plan, if the OIO agrees to wave it through.

Spark New Zealand has told the markets this morning it will sell its remaining share in mobile towers business Connexa to global investment group CDPQ for $314 million.

The sale means Spark, which completely owned its towers since inception, will not own physical mobile tower infrastructure any more, although it retains the technology that powers the infrastructure. The decision to divest from towers is part of a review of ‘non-core’ assets the company started in October.

Two years ago the telco began divesting itself from the business, which owns 1263 tower sites, when it sold 70% of what was then called Towerco to the Ontario Teachers’ Pension Plan Board for $900m.

Under new majority ownership, the company was renamed Connexa, and became New Zealand’s first independent mobile tower company, with Spark retaining a 30% holding.

The shareholding was diluted to 17% when Connexa bought 2degrees’ 1124 mobile tower sites in 2023. On completion of the deal, Ontario Teachers’ holding in Connexa rose to 83%.

Spark will no longer be in the business of physical mobile towers.

Spark said at the time the reason for retaining a share in the business was because as the anchor tenant, it ensured “we are a key strategic partner as the business grows. We will also continue to own all the 'smarts' of our network - such as radio equipment and spectrum - which is what drives our competitive advantage and differentiation in the market.”

But today’s announcement means Spark has sold its remaining shareholding, which had been whittled back to 17% in the intervening two years, to CDPQ, a Quebec, Canada-based global investment group with C$452 billion in assets under management and offices in 10 countries.

The sale will net $70m for Spark.

As part of the agreement Connexa’s majority owner, Ontario Teachers' will also sell 33% of its shareholding to CDPQ. On completion of the transaction Ontario Teachers’ and CDPQ will each hold a 50% co-controlling interest in Connexa.

Under the terms of the deal, Spark will remain a key customer of Connexa. Spark said it would continue to determine how its mobile network is developed, including where and when capacity investments occur, with Connexa then designing and deploying these build programmes. Spark will also continue to own all the 'smarts' of the network – such as radio equipment and spectrum.

The transaction is subject to Overseas Investment Office approval and any necessary foreign regulatory filings, all of which is expected to occur in the third quarter of the 2025 year. When done, Spark’s two appointed directors will resign from the Connexa board.

Spark New Zealand CEO Jolie Hodson said the sale to CDPQ, “a high-calibre global investment group, reflects the high quality of this asset and will ensure, alongside existing owner Ontario Teachers’, Connexa remains well positioned to deliver its services to customers, including Spark”.

In 2022, when Spark sold 70% of TowerCo (Connexa), Vodafone said a few days later it would be offloading an 80% interest in its 1487 towers for $1.36b.

In 2021, Australia’s Telstra sold a 49% stake in its towers for A$2.1b (NZ$2.3b).

In even bigger transactions in 2021, Spain’s Telefonica sold its 30,000 towers for €7.7b, while Germany’s Deutsche Telekom sold a 51% stake in its towers for €8.5b about the same time that Spark and Vodafone announced their transactions.

One factor is that many are faced with making sizeable new investments in physical infrastructure to build out their 5G networks.

Selling and leasing back their towers, along with some that have yet to be constructed, is a way of smoothing out that investment by paying for it in the form of rent rather than capital expenditure.