Vodafone and Telefonica Join Forces in Vantage Joint Venture


Vodafone has agreed to transfer its 50% holding in Cornerstone Telecommunications Infrastructure Limited to Vantage Towers in a 50:50 joint venture with Telefonica that will establish Cornerstone as the preferred supplier of infrastructure for both Vodafone and Telefonica.

Today, Vodafone (VOD) announced the initial eight-year term agreement starting on January 1, 2020, with three eight-year renewal periods.

The deal will make Vantage the leading tower infrastructure company in the UK and will extend its geographic presence to 10 markets, with more than 80,000 towers.

Vivek Badrinath, Vantage Towers Chief Executive, commented, “Cornerstone is exactly the type of high quality grid we like to own: a number one market position, and two strong anchor tenants with network sharing agreements in place for whom we are the preferred supplier. We look forward to working with our anchor tenants to power the UK’s digital transformation, enabling the roll-out of 5G networks to benefit business and consumers and ensuring greater mobile coverage for all.”

Vantage has ambitions of listing its shares on the Frankfurt Stock Exchange in an IPO during 2021 and Vodafone announced in July last year that it would like to maintain a majority stake in Vantage Towers post IPO. (See VOD stock analysis on TipRanks)

Berenberg analyst Carl Murdock-Smith upgraded his rating on VOD last week from Hold to Buy and raised his price target from 148p to 155p. This implies upside potential of around 32% from current levels.

Murdock-Smith believes that VOD’s discount to the telecom sector should reduce over time as Vodafone addresses key concerns and simplifies its business. He also expects consistent sales growth and a steady reduction in net debt from 2022.

Consensus among analysts is a Strong Buy based on 14 Buy recommendations. The average price target of 181.75p suggests upside potential of around 41% over the next 12 months.

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