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UPDATE 3-Vodafone's Vantage Towers seeks growth opportunities after listing

(Adds analyst, changes dateline)

LONDON/BERLIN, Nov 17 (Reuters) - Vodafone’s European towers spin-out Vantage Towers said it had 1 billion euros available for acquisitions and could increase its firepower after its planned listing in Germany early next year.

Vantage Towers presented its strategy and financial targets to investors on Tuesday. It said it expected to report pro forma adjusted core earnings of up to 540 million euros ($640 million) in the financial year to end-March 2021.

Vodafone has spun-out its mobile network towers to take advantage of investor appetite for infrastructure assets, which offer a long-term secured income stream. It will use the proceeds to reduce its debt.

Spain’s Cellnex has led the mobile infrastructure charge in Europe, and on Thursday said it was buying 24,600 telecom towers across Europe from Hong Kong’s CK Hutchison for 10 billion euros.

French operator Orange told the Financial Times on Monday it was “open minded” about the future of its towers, which it is also putting into a separate company.

Vantage Towers CEO Vivek Badrinath said a requirement for data as well as the roll-out of 5G technology and new and wider network coverage obligations across Europe was driving growth.

“These factors will increase the number of tenants renting space on our towers and we have also received firm commitments to build 7,100 new sites for our customers,” he said.

Vantage operates around 68,000 macro sites across nine European countries, led by Germany and Spain. It provides the physical towers and power supply, while the mobile operator installs its own radio transmission equipment.

Badrinath said only 42% of masts in Europe were owned by dedicated companies against 90% in the United States, and each tower had on average 1.5 mobile operator tenants versus about 2.

“Our attractively located network helps us to commercialise and grow the tenancy ratio to over 1.5 times in the medium term,” he told reporters. Vantage’s current tenancy ratio is 1.38.

He said 1 billion euros of leverage was available for strategic investments, for example in fibre back haul connections, and it could also buy more sites in its existing countries or acquire portfolios in new geographies.

“If opportunities arise that create value beyond the very strong asset base that we have...we would look at things that are attractive and consistent with what we represent,” he said, adding that it would have access to equity over and above the 1 billion euros set aside.

Analyst Jerry Dellis at Jefferies said Vantage had a strong platform for growth, a capital structure that allowed for growth investment and attractive and growing dividends.

The new company will include a proportionate share of INWIT, Italy’s largest tower operator, in which Vodafone and Telecom Italia both hold stakes.

Vodafone also said it intended to transfer its 50% stake in CTIL, its British joint venture with Telefonica, into Vantage.

Vodafone Chief Executive Nick Read said on Monday talks with Telefonica were advanced.

Consolidated earnings before interest, tax, depreciation and amortisation, adjusted for special factors (EBITDAal), for Vantage Towers were expected to come in at 530-540 million euros in 2021. In 2020, adjusted EBITDal was 523 million euros.

($1 = 0.8438 euros)

Reporting by Christoph Steitz, Douglas Busvine and Paul Sandle; editing by Thomas Seythal, Kirsten Donovan

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