November 13, 2019 / 6:01 PM / a month ago

Deutsche Telekom, on lookout for towers partners, heaps praise on Cellnex

* German group's infrastructure unit runs 33,000 towers

* CEO: interested more in IPO or partnership than outright sale

* Vodafone already plans to float towers business

* Spain's Cellnex emerges as European industry consolidator

By Isla Binnie and Douglas Busvine

BARCELONA, Nov 13 (Reuters) - Deutsche Telekom is keen to float or find a partner for its mobile towers assets, Chief Executive Tim Hoettges said on Wednesday, lavishing praise on Spain's Cellnex for its role in developing the telecoms infrastructure business.

Europe's largest telecoms group carved out its Deutsche Funkturm towers unit years ago but, unlike its rival Vodafone which plans to float its own towers unit, has yet to take concrete steps to find a buyer or partner.

"We are open for discussions on making this asset transparent. I'm ready for an IPO (initial public offering) or a partnership. I'm not in the mood for just selling," Hoettges told the Morgan Stanley European TMT Conference in Barcelona.

"It's not a European business yet - it should be a European business," he added, describing Europe's biggest towers group Cellnex as an industry "lighthouse".

Towers are attractive to investors because their predictable revenue streams can support higher leverage, and as a result potential returns.

For telcos, spinning off towers offers a route to achieving a higher valuation on their physical assets at a time when they are struggling to eke out revenue growth and pay for 5G network upgrades.

"VERY GOOD RELATIONSHIP"

Asked about the overture from Hoettges, Barcelona-based Cellnex CEO Tobias Martinez told Reuters: "We have a very good relationship which has become one of trust during the years in which we have been partners in Switzerland."

"I think that, as the Deutsche Telekom CEO indicated, Deutsche Telekom is thinking more of a long-term partnership model, someone to create value with, rather than a possible simple buyer of their towers."

Deutsche Funkturm owns 33,000 masts in Germany and the Netherlands. It reported double-digit growth in recurring rental revenue and core profits in the third quarter.

Cellnex agreed to buy the telecoms division of Britain's Arqiva for 2 billion pounds ($2.56 billion) in October, boosting its portfolio to about 53,000 sites in Spain, France, Italy, the Netherlands, Britain, Switzerland and Ireland.

The company has hiked capital twice this year, most recently attracting storming investor support for a 2.5 billion-euro ($2.8 billion) fundraising package partly aimed at funding the British deal.

Even after taking centre stage in phone towers this year, Cellnex still has appetite for deals, Martinez told the Morgan Stanley conference.

"We raised 2.5 billion euros in new equity which is a little more than double what we did the first time, because we really think there is the chance to invest up to 4 billion more on top of Arqiva," he said. ($1 = 0.7815 pounds) ($1 = 0.9074 euros) (Writing by Douglas Busvine; Editing by Emelia Sithole-Matarise)

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