23 February 2024
EQT’s attempt to acquire Wind Tre’s Radio Access Network may not have come to fruition, but it would have established one of the first independent RANco in Europe. What was the rationale behind the deal, and could it be a template for further infrastructure investment?
A growing number of mobile operators have opted to sell their towers to independent third parties, no longer viewing them as a source of competitive advantage. The proposed deal between the Swedish investment fund EQT and the Italian operator Wind Tre takes this logic one step further. Having already sold its towers to Cellnex, Wind Tre would relinquish a majority stake in its Radio Access Network (RAN).
In its press release announcing the termination of the deal, EQT highlights its intention to “continue to explore alternative infrastructure transactions, including with CK Hutchison should the appropriate opportunity arise”, showing there is still an appetite for deals of this nature.
What was the rationale for the deal?
An important reason stated by both Hutchison and EQT was to create an entity that could better tap into the wholesale telecoms market. As well as offering capacity to the other MNOs, the new company could extend its services to MVNOs, which make up 10% of the Italian mobile market.
Another rationale was the potential for further RANco consolidation. Given Wind Tre’s existing network sharing JV with Iliad in rural areas (Zefiro Net), Iliad appeared to be a prime candidate to be the RANco’s second customer. However, according to Reuters, the JV agreement with Iliad (which includes change of control clauses) proved to be a significant obstacle and is believed to be why the deal failed. Iliad, which is still focusing on expanding its market share, possibly resisted sharing its network with a partner incentivised to offer lower wholesale mobile access rates to MVNOs.
Is this a template for further investment?
While outsourcing passive infrastructure has become more common, mobile operators have traditionally preferred to keep control of their active networks. MNOs have to carefully balance the benefits of divesting their networks – notably, the cash it generates to invest elsewhere or indeed pay down debt – against the risks of heightened retail competition. A neutral-host solution, such as the one proposed by Wind Tre and EQT, would enable MVNOs through lower wholesale fees. Perhaps more importantly, it could lower the barriers to entry for disruptive new entrants. Similar effects have been observed with the sale of towers to independent third parties – for instance, Digi’s entry into the Portuguese market has been eased by access to towers from Cellnex. Some operators, such as Vodafone, have opted to maintain control even when seeking to monetise their towers.
Nevertheless, selling their RANs to independent third parties may present a compelling option to some. In particular, operators with smaller market shares (3rd/4th players in a market) stand to gain the most from loading their network with wholesale traffic and may be the least exposed to the risks posed by MNVOs or the emergence of a disruptive new entrant.
When considering potential buyers for these RANcos, towercos emerge as candidates. Venturing into the RAN can serve as a defensive strategy against the prevailing trend of network sharing among MNOs. Notably, certain towercos have already made strides in this direction. For example, Cellnex acquired Polkomtel’s passive and active infrastructure in 2021 and may well be planning on offering network as a service to other Polish operators.
