Spark sells 70% of TowerCo for $900 million to Ontario Teachers

Spark New Zealand says the Canadian investment firm Ontario Teachers' Pension Plan Board will acquire a 70% interest in its TowerCo business.

TowerCo is a New Zealand towers business with approximately 1263 sites, and Spark says the transaction values the business at $1.175 billion. It expects net cash proceeds of $900 million at completion, but that's subject to Overseas Investment Office approval which is anticipated to occur in the first half of FY23.

Under the terms of the deal, Spark has entered into a 15-year agreement with TowerCo (plus rights of renewal) to secure access to existing and new towers, with a build commitment of 670 sites over the next 10 years.

Spark New Zealand chair Justine Smyth says the establishment of TowerCo will accelerate Spark's strategic objective of delivering a smart, automated network while maximising shareholder value.

"The transaction will deliver proceeds of $900 million, enabling direct shareholder returns and investment in future growth opportunities that will accelerate Spark's transition from traditional telecommunications to higher growth digital services," she says.

"Spark intends to release an updated capital management policy at its full year results on August 24. When assessing the most appropriate use of proceeds Spark will consider three key pillars – maximising returns to shareholders, investment in future growth, and maintaining financial flexibility through an appropriate investment grade debt rating."

Smyth says the capital management policy will clarify the proportion of proceeds allocated to each area and the most effective means of returning proceeds to shareholders.

Spark CEO Jolie Hodson says the company saw a high level of market interest in its passive mobile assets and is pleased to have formed a strategic partnership with Ontario Teachers'.

She describes Ontario Teachers' as a high-calibre investor with a long-term partnering focus and significant experience managing a portfolio of infrastructure investments globally, including within Australia and New Zealand.

"Our intention in establishing TowerCo is twofold – it allows us to deliver better outcomes and service experience for our customers and Aotearoa through faster, more efficient deployment of digital infrastructure, and it better realises the value of our passive mobile assets, maximising value for shareholders and enabling us to invest in future growth opportunities," she says.

"A standalone TowerCo business with sole responsibility for passive mobile infrastructure will have a single-minded focus, delivering efficiency, service innovation, and improved speed to market. This is going to be particularly important when you consider the 5G build programs of tomorrow will be very different to the 4G ones of the past, requiring many more, smaller sites, closer to the customer, and greater overall densification."

Ontario Teachers' APAC infrastructure and natural resources managing director and head Bruce Crane says the acquisition of a 70% stake in TowerCo is an ideal fit for its growing global portfolio of high-quality infrastructure assets.

"This investment builds on our long track record of investing in superior businesses in New Zealand and will draw on our deep experience investing in digital infrastructure businesses globally," he says.

"We look forward to working with the Spark New Zealand team to build and grow a leading business that will enable New Zealanders' continued access to critical telecommunications services to meet their growing mobile demand needs over the long-term."

Spark says it will continue to determine how its mobile network is developed, including where and when capacity investments occur, with TowerCo then designing and deploying these build programmes.

Ontario Teachers' Pension Plan Board (Ontario Teachers') is a global investor with net assets of C$241.6 billion as of December 31, 2021. It invests in more than 50 countries in everything from equities to real estate to infrastructure and venture growth to deliver retirement income for 333,000 current and retired teachers in Ontario.