France’s Orange launches towers company TOTEM after profit slips

Orange launched its European masts company TOTEM on Thursday as France’s biggest telecoms groups looks to tap the rising value of tower assets after reporting a fall in annual profit.

TOTEM will regroup 25,500 tower sites in Spain and France, Orange’s two biggest markets, with assets that generated 300 million euros in core operating profit last year, Orange said.

“All options are on the table,” CFO Ramon Fernandez said on a call with reporters when asked if the state-controlled group would sell part of the entity or list it.

It follows moves by other European firms that are looking to sell mobile networks as infrastructure valuations surge on interest from investors such as U.S. private equity firm KKR and Spain’s Cellnex.

Recent tower deals have reached an average multiple of more than 22 times enterprise value to earnings before interest, tax, depreciation and amortisation (EBITDA), rating firm Moody’s said in a note on Wednesday.

Orange’s plans for TOTE< were announced as Orange reported a 2.3% fall in fourth-quarter core operating profit to 3.18 billion euros, hurt by the coronavirus crisis and heavy competition in Spanish market. The pandemic reduced lucrative roaming fees by more than half a billion euros (545 million) in 2020 as many would-be travellers stayed at home, Orange said. It posted annual earnings before interest tax depreciation and amortisation after leases (EBITDAaL) of 12.7 billion euros, down 1% on a comparable basis. Orange confirmed it would propose a dividend of 0.70 euro per share for 2020, on top of a distribution of 20 euro cents per share after it received a 2.2 billion-euro tax refund from the French state. The group expects core operating profit to be stable or slightly lower this year and its organic free cash flow from telecoms activities to top 2.2 billion euros. It confirmed its mid-term target of an organic free cash flow in the range of 3.5 to 4 billion euros in 2023.