Reuters
Madrid


Abertis is set to raise €2.14bn ($2.4bn) from the listing of its Cellnex Telecoms radio masts business this week, leaving the Spanish infrastructure group to concentrate on its remaining toll roads business, a one-track strategy which analysts say is not without its risks.
Having already sold its car parks and airports, the Barcelona-based company is now selling more than half of Cellnex, offering new investors a predictable revenue stream and strong growth potential for a business with 12,000 masts.
Yesterday it said it had increased the size of the share offering to 66% of Cellnex’s equity capital from the 60.5% previously due to better than expected demand, with the initial order book covered in just a few hours last month.
As a result the shares are expected to sell at the top end of the initial pricing range of between €12 and €14 ($13.40-$15.63) ahead of their stock market debut next Thursday, when analysts say the share price could rise further in view of the business’s growth prospects.
According to UBS, a tower costs $225,000 on average and its rent returns an annual net profit of $9,000 — a 4% yield. But the return jumps to 12% if the tower is rented to two operators and to 20% when rented to three.
In the US 35% of masts are shared by at least two operators, compared with just 10% in Europe, providing significant growth potential for Cellnex as an expected 11-fold increase in data traffic between 2013 and 2018 is also expected to spur demand for mast space.
RBC Capital Markets calculates that by adding operators to its towers and riding the data traffic growth, Cellnex should more than double its core profits by 2020 and reach margins of around 50%.
The listing of Cellnex should also give a boost to Abertis’s own shares, at least in the short term, analysts say.
They were trading at €16.69 per share at 1430 GMT yesterday, down around 8% since touching an all-time high of 18.05 euros on January 27 and lagging Spain’s blue-chip Ibex index over the last three months after a strong 2014.
But a majority of analysts see them rebounding by between 13 and 15% to €18.80-19.10 per share, helped by a clearer focus on toll roads and an increased financial strength reinforcing dividends and its ability to seize acquisition opportunities in Europe and the Americas.
At the same time, however, the less diversified company also becomes more exposed to external shocks, they say.
A recent deal with the French government over tariff hikes was preceded by a painful, seven-month showdown while Spanish authorities are challenging a 2006 agreement worth €1.67bn to compensate falling traffic at the AP-7 toll road.
Analysts also say Abertis may have a hard time finding the right returns for its planned motorways acquisitions as prices keep rising amid interest from cash-rich, yield-hungry investors bought out of government bonds.
At the same time management is having to cope with a shifting ownership base.
Private equity firm CVC has recently halved its 15% stake and its lock-up agreement expires on June 15.